Question

Dahlia Colby, CFO of Charming Florist Ltd., has created the firm's pro forma balance sheet for the next fiscal year. Sales are projected to grow by 10 percent to $440 million. Current assets, fixed assets, and short-term debt are 20 percent, 80 percent, and 10 percent of sales, respectively. Charming Florist pays out 30 percent of its net income in dividends. The company currently has $122 million of long-term debt and $50 million in common stock par value. The profit margin is 9 percent. a. Construct the current balance sheet for the firm using the projected sales figure. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.) Balance Sheet Assets Liabilities and equity Total equity Total liabilities and equity Total assets

Answer 1

a)

Balance Sheet
Assets		Liabilities and Equity
Current Assets ($440 million * 20/100)	$88 million	Short-term Debt ($440 million * 10/100)	$44 million
Fixed Assets ($440 million * 80/100)	$352 million	Long-term Debt	$122 million
		Total Liabilities (a)	$166 million
		Common Stock	$50 million
		Retained Earnings	$224 million
		Total equity (b)	$274 million
Total Assets	$440 million	Total liabilities and equity (a + b)	$440 million

Working notes:
Beginning balance Retained Earnings ($440 million - $243.72)	$196.28 million
Add: Net Income ($440 million * 9/100)	$39.60 million
Less: Dividends ($39.60*30/100)	$11.88 million
Ending Retained Earnings	$224 million