Signature Assignment: Short-Term Funding

profileMSTINA
PercentageofSales.xlsx
Home>Business & Finance homework help>Signature Assignment: Short-Term Funding

PreSop Example

PRESHOP EXAMPLE
Current Propose Propose
2014 2015 2016
SALES 200 100% 260 30% 286 10%
Variable Cost 80 40% 0 0
Depreciation 10 5%
Fixed Cost 50 25% 0 0
Total cost 140 70% 0 0
Operating Profit 60 0 0
Tax Expense 30% 18 0 0
Net Profit 42 0 0
Dividend 60% 25.2 0 0
Current Propose Propose
Assets 2014 2015 2016
Cash 10 5% 0.0 0.0
Account Receivable 15 8% 0.0 0.0
Inventory 50 0.0 0.0
Total Current Assets 75 0.0 0.0
Plant & Equip 65 0.0 0.0
Accum Deprec 10 0.0 0.0
Total Assets 150 0.0 0.0
Liabilities & Shareholders Equity
Account Payable 15 0.0 0.0
Accrued Expense 5 0.0 0.0
Total Current Liabilities 20 0.0 0.0
L/T Loan Payable 40 0.0 0.0
Common Stock 30 0.0 0.0
Retained Earnings 60 0.0 0.0
Total Liab & Equity 150 0 0
0.0 0.0
Retained Earnings
Begin Bal 0 0
Net Income 0 0
Dividends 0 0
End Bal 0 0
ASSUMPTIONS
Only current assets and liabilities vary with sales levels along with Variable costs on income statement
The PreShop has corpoartae tax rate of 30% and dividend policy of 60% payout ratio
In year 2016 company will invest $50K in new equipment resulting in depreciation cost to increase by $10K
Any cash excess or shortage will be applied to L/T Loan amount
SOLUTION Current Propose Propose
2014 % Sales 2015 % Sale 2016 % Sale
SALES 200 100.0% 260 100.0% 286 100.0%
Variable Cost 80 40.0% 104 40.0% 114.4 40.0%
Depreciation 10 5.0% 10 3.8% 20 7.0%
Fixed Costs 50 62.5% 50 19.2% 50 17.5%
Total cost 140 70.0% 164 63.1% 184.4 64.5%
Operating Profit 60 30.0% 96 36.9% 101.6 35.5%
Tax Expense @30% 18 9.0% 28.8 11.1% 30.5 10.7%
Net Income 42 21.0% 67.2 25.8% 71.1 24.9%
Dividend 60% 25.2 40.3 42.7
Current Propose Propose
Assets 2014 %sale 2015 % sale 2016 % Sale
Cash 10 5.0% 0.0% 0.0%
Account Receivable 15 7.5% 0.0% 0.0%
Inventory 50 25.0% 0.0% 0.0%
Total Current Assets 75 37.5% 0.0 0.0% 0.0 0.0%
Plant & Equip 65 32.5% 0.0% 0.0%
Accum Deprec 10 5.0% 0.0% 0.0%
Total Assets 150 0.0 0.0
Liabilities & Shareholders Equity
Account Payable 15 7.5% 0.0% 0.0%
Accrued Expense 5 2.5% 0.0% 0.0%
Total Current Liabilities 20 10.0% 0.0 0.0% 0.0 0.0%
L/T Loan Payable 40 20.0% 0.0% 0.0%
Common Stock 30 15.0% 0.0% 0.0%
Retained Earnings 60 30.0% 0.0% 0.0%
Total Liab & Equity 150 0.0 0.0
External Funding Need/(Excess Cash) - 0 0.0
Retained Earnings
Begin Bal 0.0
Net Income
Dividends -40.32 -42.7
End Bal -40.32 -42.7
SOURCE & USE FUNDS STATEMENT
Source of Funding
Cash from Operations
Net Income
Depreciation
External Financing -L/T Loan
Current Liabilities
Total Funding
Use of FUNDS
A/R
Inventory
Plant & Equip
Current Liabilities Payment
L/T Debt Payment
Dividend Payments
Total Use of Funds
INCR/(DECR) in CASH
Retained Earning CHG CHECK