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Category > Accounting Posted 07 May 2017 My Price 6.00

Financial statement of Executive Fruit Company

The following is the financial statement of Executive Fruit Company for the year ended December 2014.
INCOME STATEMENT, 2014
(Figures in $ Thousands)
  Revenue $ 3,000  
  Cost of goods sold   2,700  
       
  EBIT $ 300  
  Interest   60  
       
  Earnings before taxes $ 240  
  State and federal tax   96  
       
  Net income $ 144  
  Dividends   96  
       
  Additions to retained earnings $ 48  
       
 
BALANCE SHEET (Year-End, 2014)
(Figures in $ Thousands)
  Assets      
     Net working capital $ 300  
     Fixed assets   1,200  
       
     Total assets $ 1,500  
       
  Liabilities and shareholders' equity      
     Long-term debt $ 600  
     Shareholders' equity   900  
       
     Total liabilities and shareholders' equity $ 1,500  
       
 

The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015.
 
First stage pro forma statements:
PRO FORMA INCOME STATEMENT, 2015
(Figures in $ Thousands)
  Revenue $ 3,300  
  Cost of goods sold   2,970  
       
  EBIT $ 330  
  Interest   60  
       
  Earnings before taxes $ 270  
  State and federal tax   108  
       
  Net income $ 162  
  Dividends   108  
       
  Additions to retained earnings $ 54  
       
 
PRO FORMA BALANCE SHEET (Year-End, 2015)
(Figures in $ Thousands)
  Assets      
     Net working capital $ 330  
     Fixed assets   1,320  
       
     Total assets $ 1,650  
       
  Liabilities and shareholders' equity      
     Long-term debt $ 600  
     Shareholders' equity   954  
       
     Total liabilities and shareholders' equity $ 1,554  
       
        Required external financing $ 96  
       
 
Second stage pro forma balance sheet:
PRO FORMA BALANCE SHEET (Year-End, 2015)
(Figures in $ Thousands)
  Assets      
     Net working capital $ 330  
     Fixed assets   1,320  
       
     Total assets $ 1,650  
       
  Liabilities and shareholders' equity      
     Long-term debt $ 696  
     Shareholders' equity   954  
       
     Total liabilities and shareholders' equity $ 1,650  
       
 

How would Executive FruitAc€?cs financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)
 

Dividends fall by $ . Therefore, the requirement for external financing falls from $ to $ . On the other hand, shareholders' equity will be increased by $ .

  

The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):
   
  Long-term debt $
  Shareholders' equity  
   
  Total $

Answers

Alpha Geek
(8)
Status NEW Posted 07 May 2017 05:05 PM My Price 6.00

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Attachments

file 1494178522-Answer.docx preview (414 words )
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