Question

Prepare a forecast, showing any calculations

BALANCE SHEETS 2016 2,860 0 Use the following financial statements to answer questions (Dollars are stated in $millions) INCOME STATEMENT 2015 2016 2015 2016 Net Sales 8,360 9,610 Cash 310 405 Cost of goods sol 5,247 6,310 Accounts rec. 2,640 3,055 Depreciation 1,340 1,370 Inventory 3,275 3,850 EBIT 1,773 1,930 Current assets 6,225 7,310 Interest 620 630 Net fixed assets 10,960 10,670 Taxable income 1,153 1,300 Taxes 403 455 Total assets 17,185 17,980 Net Income 750 845 Shares outstanding Market price Accounts payable Notes payable Current liabilities Long-term debt Common stock Retained earnings Total liabilities and ec 2015 2,720 100 2,820 7,875 5,000 1,490 17,185 2,860 7,810 5,250 2,060 17,980| 50,000 23.37 $ 7. Prepare a forecast for 2017 income statement and balance sheet to show the external funds needed. Use the following assumptions: Sales increase 15% All operating costs, assets, and current liabilities vary directly with sales Interest expense, long-term debt, and common stock do not change The average tax rate is 30% (assume there was tax reform so it is lowered for this year) No dividends 2016 2017 Net Sales $ 9,610 Cost of goods sold $ 6,310 Depreciation $ 1,370 EBIT $ 1,930 Interest $ 630 Taxable income $ 1,300 Taxes $ 455 Net Income $ 845 Cash Accounts rec. Inventory Current assets Net fixed assets Total assets $ 405 $ 3,055 $ 3,850 $ 7,310 $ 10,670 $ 17,980 2,860 Accounts payable Notes payable Current liabilities Long-term debt Common stock Retained earnings Total liabilities and equity $ $ $ $ $ $ $ 2,860 7,810 5,250 2,060 17,980 EFN

Answer 1

Preparing forecasted Income Statement based on increase in% of sales and other info provided:

Particular	2017
Sales	11,051.50
Less: COGS	7,256.50
Gross Profit	3,795.00
Depreciation	1,575.50
EBIT	2,219.50
interest	630.00
Taxable Income	1,589.50
Taxation @ 30%	476.85
Net income	1,112.65
Dividends	-
Retained Earnings	1,112.65

EFN = (Total assets of previous year)*(% increase in Sales) - (Spontaneous Liabilities of previous year)*(% increase in Sales) - Retained earnings of the forecasted Year

EFN = (17980)(15%) - (2860)(15%) - 1112.65

= $ 2697 - 429 - 1112.65

= $1155.35

Notes payable are not part of Spontaneous Liabilities

As, Long-term debt and Common Stock Will remain same, EFN will be financed through Notes payable.

Preparing Forecasted balance sheet:

ASSETS	2017	LIABILITIES	2017
Cash	465.75	Accounts payable	3289
Accounts receivables	3513.25	Notes Payable	1155.35
Inventory	4427.5	Current Liabilities	4444.35
Current Assets	8406.5	Long-term Debt	7810
Net Fixed Assets	12270.5	Common Stock	5250
		Retained earnings	3172.65
TOTAL ASSETS	20677	TOTAL LIABILITIES AND OWNER"S EQUITY	20677

Total assets and Current liabilities are increased in proportion with sales % increase.

EFN is Financed through Notes payable

Common Stock and long term debt are same as provided by question.

Retained Earnings increased by forecasted increase of Retained Earnings of 2017 as calculated above.

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