Question: You have been asked to help the Nero Violin Company [The firm motto is "There will be a hot time in the old town tonight!"] plan for the year 2010. Nero's end-of-year balance sheet for 2009 is given below:
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Balance Sheet - December 31, 2009
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Cash
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$100
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Accounts payable
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$500
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Marketable securities
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200
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Bank notes payable
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300
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Accounts receivable
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400
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Bonds payable
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400
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Inventories
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500
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Common stock
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1,000
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Plant, net
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1,600
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Retained earnings
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600
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Total Assets
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$2,800
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Total L+E
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$2,800
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Sales in 2009 were $4,000; 2010 sales are forecast to be 4,400 dollar. The company has a net profit margin of 9 percent & pays one-third of its earnings after taxes as dividends. The marketable securities account is used to accumulate funds for acquisitions. Since the firm is operating at full capacity, it anticipates that plant will increase proportionally with increased sales. All of the bank notes payable and $50 of the bonds payable must be repaid in 2010.
Required;
Forecast the company's December 31, 2010 pro-forma balance sheet. Identify external financing need (EFN) or excess cash generated.