FIN370 WEEK 3

4-1A. (Financial forecasting) Zapatera Enterprises is evaluating its financing requirements for

the coming year. The firm has only been in business for one year, but its Chief Financial Officer
predicts that the firm’s operating expenses, current assets, net fixed assets, and current liabilities
will remain at their current proportion of sales.
Last year Zapatera had $12 million in sales with net income of $1.2 million. The firm anticipates
that next year’s sales will reach $15 million with net income rising to $2 million. Given its present
high rate of growth, the firm retains all of its earnings to help defray the cost of new investments.
Balance Sheet year end
Current Assets
Net Fixed Assets
Total

12/31/03
$3,000,000
6,000,000
9,000,000

% of Sales
25%
50%

Liabilities and Owners Equity
Accts Payable
3,000,000
25%
Long-term Debt
2,000,000
*Na
Total Liability
5,000,000
Common Stock
1,000,000
*Na
Paid-in Capitol
1,800,000
*Na
Retained earnings
1,200,000
Common equity
4,000,000
Total
9,000,000
*Assumed to remain constant for purposes of making next year’s forecast of financing requirements.
Estimate Zapatera’s total financing requirements (i.e. total assets) for 2004 and its not funding
requirements.