Answer:
Global Corporation
Forecasted sales = Current Net Sales x (1 + growth rate)
= $186,200,000 x (1 + 0.09) = $186,200,000 x 1.09 = $202,958,000
Forecasted Net Income = $1,745,438.80 (202,958,000 x 0.86%)
Forecasted Dividend payout = $872,719.40 ($1,745,438.80 x 50%)
Forecasted Retained Earnings = $872,719.40 = $0.87 million
Therefore Forecasted equity = Current Equity + Forecasted Retained Earnings = $22.6 ($21.7 + $0.87)
Explanation:
a) Data and Percentage Calculations:
Income Statement ($million) Percentage
Net Sales 186.2 100%
Assets Cost Except Depreciation -175.2 94.09%
EBITDA 11.0 5.9%
Depreciation and Amortization -1.1
EBIT 9.9
Interest Income (expense) -7.7
Pre tax Income 2.2
Taxes -0.6
Net Income 1.6 0.86%
Dividends paid 50% -0.8
Retained Earnings 50% 0.8
Balance Sheet ($million)
Cash 22.9
Accounts Receivable 18.1
Inventories 15.1
Total Current Assets 56.1
Net Property, Plant, and Equipment 113.6
Total Assets 169.7
Liabilities and Equity
Accounts Payable 34.4
Long term Debt 113.6
Total Liabilities 148.0
Total Stockholders' Equity 21.7
Total Liabilities and Equity 169.7
b) The percent of sales method enables the calculation of the relationship between sales and the line figures in the income statement. Our interest for this question, is the Retained Earnings which we use to calculate the Stockholders' Equity forecasted balance. The retained earnings percentage to sales = Retained Earnings as given divided by the net sales figure, and then multiplied by 100.
c) To forecast the sales, we use the growth rate of 9%. This is equal to the current sales x 1.09. Based on this sales, it becomes possible to forecast the Retained Earnings, having established the percentage of Retained Earnings to Sales, using the percent of sales method. We apply the established percentage of Retained Earnings to the Sales figure, to get the Retained Earnings for the forecasted period. This is then added to the Stockholders' Equity to get the forecasted stockholders' equity.
