Question

SAN Chapter 12 Corporate Valuation and Financial Planning 529 van Auken's financing deficit or surplus? (Hints: Assume any additional financing through the line of credit will be drawn on the last day of the year. There- fore, the line of credit will not accrue interest expense during the year because any new line of credit is added at the end of the year; also, use the forecasted income statement to determine the addition to retained earnings for use in the balance sheet.) MS ANSWERS ARE IN APPENDIX B (12-1) uation EASY PROBLEMS 1-3 Broussard Skateboard's sales are expected to increase by 15% from $8 million in 2019 to $9.2 million in 2020. Its assets totaled $5 million at the end of 2019. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2019, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 40%. Use the AEN equation to forecast Broussard's additional funds needed for the coming vear Berman & laccor Corporation's current sales and partial balance sheet are shown here. Sales are expected to grow by 10% next year. Assuming no change in operations from this year to next year, what are the projected total operating assets? 12-2) jected Assets

help with equation 12-1

Answer 1

EFN = (A/S) x (Δ Sales) - (L/S) x (Δ Sales) - (PM x FS x (1-d))
Where:
A/S = Assets which change in direct proportion to sales.
Δ Sales = Change in sales
L/S = Spontaneous liabilities that change with sales.
PM = Profit margin
FS = Forecast sales
d = Dividend payout percentage
Substituting values, AFN is
AFN = (5000000/8000000)*(9200000-8000000)-(900000/8000000)*(9200000-8000000)-9200000*6%*(1-40%) =	$ 2,83,800