Answer:
Peabody & Peabody
a. Peabody & Peabody
Pro Forma Balance Sheet
December 31, 2021 ($000)
Cash 480
Marketable securities 200
Accounts receivable 1,440
Inventories 2,160
Total current assets 4,280
Net fixed assets 4,820
Total assets 9,100
Liabilities and Stockholders equity:
Accounts payable 1,680
Accruals 500
Other current liabilities 80
Total current liabilities 2,260
Long-term debt 2,000
Total liabilities 4,260
Common equity 3,900
Total liabilities and stockholders’ equity $8,160
Required Finance 940
b. From the statement prepared in part a, it is clear that Peabody & Peabody requires new financing of $940,000 for 2020 to meet the projected assets base.
Explanation:
a) Data and Calculations:
2019 Sales = $10 million
Pro Forma Balance Sheet
December 31, 2017 ($000)
Assets:
Cash 400
Marketable securities 200
Accounts receivable 1,200
Inventories 1,800
Total current assets 3,600
Net fixed assets 4,000
Total assets 7,600
Liabilities and Stockholders equity:
Accounts payable 1,400
Accruals 400
Other current liabilities 80
Total current liabilities 1,880
Long-term debt 2,000
Total liabilities 3,880
Common equity 3,720
Total liabilities and stockholders’ equity $7,600
Purpose: To analyze expected performance and financing needs for 2021.
1. Percent of Sales ($12 million)
Accounts receivable, 12% $1,440
Inventory, 18% $2,160
Accounts payable, 14% $1,680
Net profit margin, 3% $360
2. Market securities $200
3. Cash balance (desired minimum) $480
4. Net fixed assets 4,000
New equipment in 2020 650
Depreciation, 2020 (290)
New equipment in 2021 850
Depreciation, 2021 (390)
Net fixed assets $4,820
5. Accruals $500
8. Dividend payout = 50% of $360 = $180
Retained Earnings (current) = $180
Common Equity:
2019 3,720
Income 180 (Retained Earnings)
2020 3,900
