Reference no: EM1312967
Preparation of Pro Forma Balance Sheet.
Pro Forma balance sheet------ Peabody and Peabody has 2006 sales of $10million. It wishes to analyze expected performance and financing needs for 2008-2 years ahead. Given the following information, respond to parts A and B.
(1) The percents of sales for items that vary directly with sales are as follows:
a. Accounts receivable, 12%
b. Inventory, 18%
c. Accounts payable, 14%
d. Net profit margin, 3%
(2) Marketable securities and other current liabilities are expected to remain unchanged.
(3) A minimum cash balance of $480,000 is desired.
(4) A new machine costing $650,000 will be required in 2007, and equipment costing $850,000 will be purchased in 2008. Total depreciation in 2007 is forecast as $290,000, and in 2008 $390,000 of deprecation will be taken.
(5) Accruals are expected to rise to $500,000 by the end of 2008.
(6) No sale or retirement of long-term debt is expected
(7) No sale or repurchase of common stock is expected.
(8) The dividend payout of 50% of net profits is expected to continue.
(9) Sales are expected to be $11 million in 2007 and $12 million in 2008.
(10) The December 31, 2008 balance sheet is given below
|
Peabody & Peabody
Balance Sheet
31-Dec-06 $ in (000)
|
|
Assets
|
|
Liabilities & Stockholders' Equity
|
|
|
Cash
|
$400
|
Accounts payable
|
$1,400
|
|
Marketable securities
|
$200
|
Accruals
|
400
|
|
Accounts receivable
|
1200
|
Other Current Liabilities
|
80
|
|
Inventories
|
1800
|
Total Current Liabilities
|
$1,880
|
|
Total current Assets
|
$3,600
|
Long term Debt
|
$2,000
|
|
Net fixed assets
|
4000
|
Common equity
|
$3,720
|
|
Total assets
|
$7,600
|
Total Liabilities & stockholders' equity
|
$7,600
|
A. Prepare a pro forma balance sheet dated December 31, 2008
B. Discuss the financing changes suggested by the statement prepared in part A