Assignment:
Tucker tool has 2001 sales of $10 million. It wishes to analyze expected performance and financing needs for 2003 - two years ahead.
1. The percent of sales for items that vary directly with sales are follows:
Cash 4%
Receivables 12%
Inventory 18%
Net fixed assets 40%
Accounts payable 14%
Accruals 4%
Net profit margin 3%
2. marketable securities and other current liabilities are excepted to remain unchanged
3. no sale or retirement of long term debt is expected
4. no sale or repurchase of common stock is expected
5. the dividend payout of 50% of net profits is expected to continue
6. sales are expected to be %11 million in 1997 and 12 million in 1998
7. the December 31, 2001, balance sheet appears below
Tucker tool
Balance sheet
December 31, 2001
Assets liabilities and equities
Cash $400 accounts payable $1400
Marketable securities $200 accruals $400
Accounts receivable $1200 other current liabilities $80
Inventories $1800
Total current liabilities $1800
Total current assets $3600 long term debt $2000
Net fixed assets $4000 common equities $3720
Total assets $ 7600 total liabilities and
Stockholder's equity $7600
Requirements
Q1. Prepare a pro forma balance sheet dated December 31, 1996
Q2. Discuss the financing changes suggested by the statement prepared in (1).