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Category > Business & Finance Posted 05 Aug 2017 My Price 12.00

B2. (Pro forma financial statements) Columbus Distributors


B2. (Pro forma financial statements) Columbus Distributors has the following balance sheet:

ASSETS LIABILITIES AND OWNERS’ EQUITY
Cash $ 500,000 Accounts payable $ 1,000,000
Accounts receivable 3,500,000 Bank loan 1,500,000
Inventory 3,000,000 Long-term bond 2,000,000
Fixed assets 3,000,000 Stockholders’ equity 5,500,000
Total assets $10,000,000 Total liabilities and equity $10,000,000

Next year Columbus Distributors is planning for a major sales increase of 40%. Sales are currently $15,000,000, and they should increase to $21,000,000 next year. Cash, receivables, and inventory will increase proportionally to sales. Fixed assets will increase by $500,000. Payables will also increase proportionally to sales. The bank loan will increase to $2,000,000. Sinking fund payments will decrease the bond balance by $200,000. Columbus has a 6.0% profit margin and is expecting to pay a nominal dividend of $100,000 to its common stockholders.

Prepare a pro forma balance sheet for next year. Does the balance sheet show that extra external funds are needed or that excess funds are available for investment?

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Status NEW Posted 05 Aug 2017 07:08 PM My Price 12.00

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