Income Statement Year 2019 2020 Net Revenue 140,000 - Cost of Goods Sold 70,000 - Depreciation...
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Year |
2019 |
2020 |
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Net Revenue |
140,000 |
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- Cost of Goods Sold |
70,000 |
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- Depreciation Expense |
9,000 |
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EBIT |
61,000 |
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- Interest Expense |
10,500 |
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Income Before Taxes |
50,500 |
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Tax Expense |
10,605 |
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Net Income 2019 Dividend |
39,895 9,974 |
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Balance Sheet |
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Year (end of) |
2019 |
2020 |
2019 |
2020 |
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Assets |
Liabilities |
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Current Assets |
Current Liabilities |
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Cash and Equivalents |
10,000 |
Accounts Payable |
21,000 |
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Accounts Receivable |
25,000 |
Long-term Debt |
95,000 |
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Inventory |
12,000 |
Total Liabilities |
116,000 |
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Fixed Assets, Net |
165,000 |
Stockholders' Equity |
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Total Assets |
212,000 |
Common Stock |
44,000 |
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Retained Earnings |
52,000 |
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Total Stockholders Equity |
96,000 |
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Sales will grow by 10% in 2020. All costs, assets, and current liabilities vary directly with sales. Interest Exp., Common Stock, Tax Rate and Div. payout ratio are constant. L-T Debt=Plug number.
1A. Prepare a 2020 forecast. What is the 2020 Dividend and Addition to Retained Earnings?
1B. If a bank will allow Atlantic to borrow 2.5 times prior year EBITDA, how much total Long-Term Debt would the bank allow in 2020?
1C. What is Atlantic’s Days Accounts Payables in 2020? By how many Days would A/P need to increase to balance the Balance Sheet if Long-Term Debt = $70,000?
Homework Answers
| Income Statement | |||||||||
| 2019 | 2020 | ||||||||
| Net Revenue | 140,000 | 154,000 | (1.1*140000) | ||||||
| Cost of goods sold | 70,000 | 77,000 | (1.1*70000) | ||||||
| Depreciation expense | 9,000 | 9,900 | (9000*1.1) | ||||||
| EBIT | 61,000 | 67,100 | |||||||
| Interest expense | 10,500 | 10,500 | |||||||
| Income Before taxes | 50,500 | 56,600 | |||||||
| Tax expense(21%) | 10,605 | 11,886 | |||||||
| Net Income | 39,895 | 44,714 | |||||||
| Dividend | 9,974 | 11,179 | |||||||
| Payout ratio=9974/39895 | 0.250006 | 0.250006 | |||||||
| Tax Rate=10605/50500 | 0.21 | 0.21 | |||||||
| Addition to Retained Earning | 29,921 | 33,535 | (44714-11179) | ||||||
| BALANCE SHEET | |||||||||
| 2019 | 2020 | 2019 | 2020 | ||||||
| Assets: | Liabilities: | ||||||||
| Current Assets | Current Liabilities: | ||||||||
| Cash & Cash Equivalent | 10,000 | 11,000 | (1.1*10000) | Accounts Payable | 21,000 | 23,100 | (1.1*21000) | ||
| Accounts Receivable | 25,000 | 27,500 | (1.1*25000) | Long Term debts | 95,000 | 80,565 | (233200-129535-23100) | ||
| Inventory | 12,000 | 13,200 | (1.1*12000) | Total Liabilities | 116,000 | 103,665 | |||
| Fixed Assets(Net) | 165,000 | 181,500 | (1.1*165000) | Stockholders Equity: | |||||
| Total Assets | 212,000 | 233,200 | Common Stock | 44,000 | 44,000 | ||||
| Retained Earnings | 52,000 | 85,535 | (52000+33535) | ||||||
| Total Stockholders Equity | 96,000 | 129,535 | |||||||
| Liabilities+Equity | 212,000 | 233,200 | |||||||
| 1A | 2020 Dividend | 11,179 | |||||||
| 2020 addition to retained earnings | 33,535 | ||||||||
| 1B | 2019 EBIT | 61,000 | |||||||
| Depreciation expense | 9,000 | ||||||||
| 2019 EBITDA | 52,000 | ||||||||
| Bank will allow to borrow=2.5*52000 | 130,000 | ||||||||
| 1C | DAYS ACCOUNT PAYABLE IN 2020 | ||||||||
| Accounts Payable Turnover=Cost of Goods sold/Accounts Payable | |||||||||
| Accounts Payable Turnover= | 3.33333333 | (77000/23100) | |||||||
| Days Accounts Payable=365/Accounts Payable Turnover | |||||||||
| DAYS ACCOUNT PAYABLE IN 2020 | 109.5 | Days | (365/3.3333) | ||||||
| If Long Term debt =$70000 |
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