Question

Income Statement Sales Costs Taxable income Taxes (40%) Net Income 25,800 13,600 12,200 4.880 7,320 Retained Earnings Dividends 4,026 3,294 Balance Sheet Current Assets Fixed Assets Total 18,000 Total Debt 13.500 Owners Equity 31,500 Total 7,500 24.000 31,500 The company is forecasting a 35% increase in sales for the coming year, costs, assets and liabilities vary directly with sales, while equity does not 1. Calculate Profit Margin: 2. Calculate Retention Ratio (plowback): 3. Calculate pro forma statements and External Funds Needed (Plug) at a 40% tax rate:

Answer 1

1) Profit Margin:

O Penfet Magin Gress Pacfit Nat Sals 11 xtoo t2 200 25,800 429/ 1 PaefiMagia 4 21 47-21%

2) Retention Ratio:

Petaine Eatnings Xtet encenie Retention Ratio 4026 千320 0-5S Ritestion latip

3) a) Income Statement

DLcone Sfatmud Poele ai on ENEOT Gfuun SSy. imerease in Sales Cialaili 35%, mly lot tahich ASset Vy direetty eeith Sale ans 4mt Particiilous Sali's Cests 4830 T& 3Z mE13 C6588 Nlet rcome A

b) balance sheet & external fund needed

Badanee Shet Assets 4 1R Total Oebt Cuonir Egu Eactunal furdy STneidrd Guset asset hixed assCt 24300 t&225 tD125 24000 sgeo Teterl 4252S 42520 Tetal. Arnds needed Eaitraal 400 AN

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