Problem 12-6

Booth's fixed assets were used to only 50% of capacity during 2004, but its current assets were at their proper le at the same rate as sales, and fixed assets would also increase at the same rate if the current excess capacity di forecasted to be 5%, and its payout ratio will be 60%. What is Booth's additional funds needed for the coming yea
The spontaneous increase in liabilities will be $50 + $50 = $100 (accounts payable and accruals both increase by 100%). The company will have to raise $500 - $40 - $100 = $360 in funds. These are the additional funds needed. They can be raised

Booth Company
Current and Projected Income Statements

Current Sales Net Income Dividends paid Addition to Retained Earnings 1000 $100

Projected 2000 $100

$40 $60

$40 $60

Booth Company
Current and Projected Balance Sheets Current ASSETS Current Assets: Cash Accounts Receivable Inventory Total Current Assets Fixed Assets TOTAL ASSETS LIABILITIES AND EQUITY Current Liabilities: Accounts payable Accrued Expenses Notes Payable Total Current Liabilities Long-term Debt Total Liabilities Common Stock Retained Earnings Total Equity TOTAL LIABILITIES AND EQUITY Projected

$100 $200 $200 $500 $500 $1,000

$200 $400 $400 $1,000 $500 $1,500

$50 $50 $150 $250 $400 $650 $100 $250 $350 $1,000

$50 $50 $150 $250 $400 $650 $560 $290 $850 $1,500 $360 $1,500 $360

Additional Funds Needed (AFN): Total Liabilities & Equity, external financing:

s were at their proper levels. All assets except fixed assets increase rrent excess capacity did not exist. Booth's after-tax profit margin is eded for the coming year?

increase by 100%). eded. They can be raised through debt or common stock issuance.

PRoblem 12-9 Garlington Technologies Income Statement Sales Operating costs EBIT Interest EBT Taxes (40%) Net income Dividends Retained Earnings Balance Sheet Cash Receivables Inventories Total current assets Fixed assets Total assets AFN 2010 180,000 360,000 720,000 1,260,000 1,440,000 2,700,000 2010 3,600,000 3,279,720 320,280 18,280 302,000 120,800 181,200 108,000 Proforma 2011 3,960,000 10% increase 3,607,692 10% increase 352,308 20,280 13% increase 332,028 132,811 199,217 112,000 87,217 Proforma 2011 198,000 396,000 792,000 1,386,000 10% increase 1,584,000 2,970,000 128,783

Accounts payable Notes payable Accruals Total current liabilities Common stock Retained earnings Total liabilities and equity

AFN = Total Assets - Total Liaiblities + Equity

Increase NP by 128,783 on the balance sheet

Proforma 2010 2011 360,000 396,000 156,000 156,000 180,000 198,000 696,000 750,000 10% increase in sponatenous liabilities 1,800,000 1,800,000 204,000 291,217 Increase by 87,217 2,700,000 2,841,217