Hello I am not angry with you at all, however is there any way possible that you can help me with these two problems and we can call it even? Just let me know I am not trying to get over, however my computer had crashed and I am behind in class I purchased me a new laptop a few days ago and I am just getting back on track, please let me know?
1. Consider the Industrial Supply Company example (Table 4.4) again. Assume that the company plans to maintain its dividend payments at the same level in 2011 as in 2010. Also assume that all of the additional financing needed is in the form of short-term notes payable. Determine the amount of additional financing needed and pro forma financial statements (that is, balance sheet, income statement, and selected financial ratios) for 2011 under each of the following conditions.
Increase in Sales Increase in Expenses
a. $3,750,000 $3,750,000
b. $3,000,000 $2,800,000
c. $4,500,000 $4,000,000
2. In the Industrial Supply Company example (Table 4.4) it was assumed that the company's fixed assets were being used at nearly full capacity and that net fixed assets would have to increase proportionately as sales increased. Alternatively, suppose that the company has excess fixed assets and that no increase in net fixed assets is required as sales are increased. Assume that the company plans to maintain its dividend payments at the same level in 2011 as in 2010. Determine the amount of additional financing needed for 2011 under each of the following conditions.
Increase in Sales Increase in Expenses
a. $3,750,000 $3,750,000
b. $3,000,000 $2,800,000
c. $4,500,000 $4,000,000
b. $3,000,000 $2,800,000
Of course, I'd be happy to help you with these problems. Here's how you can approach them:
1. For the first problem, you need to determine the amount of additional financing needed and create pro forma financial statements under different conditions. To solve this, follow these steps:
a. Start with the given balance sheet and income statement information from Table 4.4 provided in the Industrial Supply Company example.
b. Calculate the increase in sales and increase in expenses for each condition.
c. Determine the impact of these changes on the company's balance sheet items such as current assets, current liabilities, long-term debt, and equity. Adjust these values accordingly.
d. Next, update the income statement by adjusting expenses based on the given conditions.
e. Calculate the change in retained earnings by considering the dividend payments and net income.
f. Finally, you can calculate the additional financing needed by adjusting the short-term notes payable to balance the increased assets and liabilities due to the changes in sales and expenses.
Repeat these steps for each condition (a, b, c) to get the pro forma financial statements and the amount of additional financing needed.
2. For the second problem, you need to determine the amount of additional financing needed under the assumption that no increase in net fixed assets is required. The steps are similar to the first problem, except that you don't have to adjust the fixed assets. Follow these steps:
a. Again, start with the given balance sheet and income statement information from Table 4.4.
b. Calculate the increase in sales and increase in expenses for each condition.
c. Determine the impact of these changes on the company's balance sheet items such as current assets, current liabilities, long-term debt, and equity. Adjust these values accordingly, except for the fixed assets.
d. Update the income statement by adjusting expenses based on the given conditions.
e. Calculate the change in retained earnings by considering the dividend payments and net income.
f. Finally, calculate the additional financing needed by adjusting the short-term notes payable to balance the increased assets and liabilities due to the changes in sales and expenses.
Repeat these steps for each condition (a, b, c) to get the pro forma financial statements and the amount of additional financing needed.
By following these steps, you should be able to solve both problems and determine the required additional financing for each condition.