EFN Assignment 2
2
ASSIGNMENT NO: 2 Marks: 15 Cheryl Colby, CFO of Charming Florist Limited, has created the firm’s pro forma balance sheet for the next fiscal year. Sales are projected to grow by 10% to $390 million. Current assets, fixed assets, and short term debt are 20%, 120% and 15% of sales, respectively. Charming Florist Limited pays out 30% of its net income in dividends. The company currently has $130 million of long-term debt and $48 million in common stock par value. The profit margin is 12%. a) Construct the current balance sheet for the firm using the projected sales figures. b) Based on CFO’s sales growth forecast, how much does the firm need in external funds for the next fiscal year? 1
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Transcript of EFN Assignment 2
ASSIGNMENT NO: 2 Marks: 15
Cheryl Colby, CFO of Charming Florist Limited, has created the firm’s pro forma balance sheet for the next fiscal year. Sales are projected to grow by 10% to $390 million. Current assets, fixed assets, and short term debt are 20%, 120% and 15% of sales, respectively. Charming Florist Limited pays out 30% of its net income in dividends. The company currently has $130 million of long-term debt and $48 million in common stock par value. The profit margin is 12%.
a) Construct the current balance sheet for the firm using the projected sales figures.
b) Based on CFO’s sales growth forecast, how much does the firm need in external funds for the next fiscal year?
c) Construct the firm’s pro forma balance sheet for the next fiscal year and confirm the external funds needed that you calculated in part (b).
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