Question

Construct Albert Retail Co's Pro Forma Income Statement and Balance Sheet for Years 1 to 3 under the following policies:

COGS+SG&A+Depreciation = 60% of Revenue

Dividend Payout = 50%

Current Assets = 40% of Revenue

Net Fixed Assets = 60% of Revenue

Current Liabilities = 70% of Current Assets

Corporate Tax Rate = 21%

	Year
	0 (2018)	1	2	3
Revenue	150.0	195.0	253.5	253.5
COGS+SG&A+Depreciation	90.0
EBIT	60.0
Tax (21%)	12.6
Net Income	47.4
Dividends	23.7
Addition to Retained Earnings	23.7
Current Assets	60.0
Net Fixed Assets	90.0
Total Assets	150.0
Current Liabilities	42.0
Long-Term Liab - Debt	30.0
Owners' Equity	78.0
Total Liabilities and Owners' Equity	150.0
Assets – Liabilities &Owners Equity	0.0

What would you do for Year 2?

Question 19 options:

	Nothing, there will be an excess of cash for $20
	Finance shortfall with Notes Payable for $20
	Finance shortfall with Notes Payable for $8.7
	Nothing, there will be an excess of cash for $8.7

Answer 1

1
	Year
		0 (2018)	1	2	3
	Revenue	150	195	253.5	253.5
	COGS+SG&A+Depreciation	90	117	152.1	152.1
	EBIT	60	78	101.4	101.4
	Tax (21%)	12.6	16.4	21.3	21.3
	Net Income	47.4	61.6	80.1	80.1
	Dividends	23.7	30.8	40.1	40.1
	Addition to Retained Earnings	23.7	30.8	40.1	40.1
	Current Assets	60	78.0	101.4	101.4
	Net Fixed Assets	90	117.0	152.1	152.1
	Total Assets	150	195.0	253.5	253.5
	Current Liabilities	42	54.6	71.0	71.0
	Long-Term Liab - Debt	30	31.6	33.7	-6.4
	Owners' Equity	78	108.8	148.9	188.9
	Total Liabilities and Owners' Equity	150	195.0	253.5	253.5
	Assets – Liabilities &Owners Equity	0	0.0	0.0	0.0