The following is the financial statement of Executive Fruit Company for the year ended December 2014.
INCOME STATEMENT, 2014 (Figures in $ Thousands) Revenue $ 4,000 Cost of goods sold 3,600 EBIT $ 400 Interest 80 Earnings before taxes $ 320 State and federal tax 128 Net income $ 192 Dividends 128 Additions to retained earnings $ 64
BALANCE SHEET (Year-End, 2014) (Figures in $ Thousands) Assets Net working capital $ 400 Fixed assets 1,600 Total assets $ 2,000 Liabilities and shareholders' equity Long-term debt $ 800 Shareholders' equity 1,200 Total liabilities and shareholders' equity $ 2,000
The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015.
First stage pro forma statements:
PRO FORMA INCOME STATEMENT, 2015 (Figures in $ Thousands) Revenue $ 4,400 Cost of goods sold 3,960 EBIT $ 440 Interest 80 Earnings before taxes $ 360 State and federal tax 144 Net income $ 216 Dividends 144 Additions to retained earnings $ 72
PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 440 Fixed assets 1,760 Total assets $ 2,200 Liabilities and shareholders' equity Long-term debt $ 800 Shareholders' equity 1,272 Total liabilities and shareholders' equity $ 2,072 Required external financing $ 128
Second stage pro forma balance sheet:
PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 440 Fixed assets 1,760 Total assets $ 2,200 Liabilities and shareholders' equity Long-term debt $ 928 Shareholders' equity 1,272 Total liabilities and shareholders' equity $ 2,200
How would Executive Fruitâs financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)
Dividends fall by $ . Therefore, the requirement for external financing falls from $ to $ . On the other hand, shareholders' equity will be increased by $ .
The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):
Long-term debt $ Shareholders' equity Total $
| The following is the financial statement of Executive Fruit Company for the year ended December 2014. |
| INCOME STATEMENT, 2014 | |||
| (Figures in $ Thousands) | |||
| Revenue | $ | 4,000 | |
| Cost of goods sold | 3,600 | ||
| EBIT | $ | 400 | |
| Interest | 80 | ||
| Earnings before taxes | $ | 320 | |
| State and federal tax | 128 | ||
| Net income | $ | 192 | |
| Dividends | 128 | ||
| Additions to retained earnings | $ | 64 | |
| BALANCE SHEET (Year-End, 2014) | |||
| (Figures in $ Thousands) | |||
| Assets | |||
| Net working capital | $ | 400 | |
| Fixed assets | 1,600 | ||
| Total assets | $ | 2,000 | |
| Liabilities and shareholders' equity | |||
| Long-term debt | $ | 800 | |
| Shareholders' equity | 1,200 | ||
| Total liabilities and shareholders' equity | $ | 2,000 | |
| The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015. |
| First stage pro forma statements: |
| PRO FORMA INCOME STATEMENT, 2015 | |||
| (Figures in $ Thousands) | |||
| Revenue | $ | 4,400 | |
| Cost of goods sold | 3,960 | ||
| EBIT | $ | 440 | |
| Interest | 80 | ||
| Earnings before taxes | $ | 360 | |
| State and federal tax | 144 | ||
| Net income | $ | 216 | |
| Dividends | 144 | ||
| Additions to retained earnings | $ | 72 | |
| PRO FORMA BALANCE SHEET (Year-End, 2015) | |||
| (Figures in $ Thousands) | |||
| Assets | |||
| Net working capital | $ | 440 | |
| Fixed assets | 1,760 | ||
| Total assets | $ | 2,200 | |
| Liabilities and shareholders' equity | |||
| Long-term debt | $ | 800 | |
| Shareholders' equity | 1,272 | ||
| Total liabilities and shareholders' equity | $ | 2,072 | |
| Required external financing | $ | 128 | |
| Second stage pro forma balance sheet: |
| PRO FORMA BALANCE SHEET (Year-End, 2015) | |||
| (Figures in $ Thousands) | |||
| Assets | |||
| Net working capital | $ | 440 | |
| Fixed assets | 1,760 | ||
| Total assets | $ | 2,200 | |
| Liabilities and shareholders' equity | |||
| Long-term debt | $ | 928 | |
| Shareholders' equity | 1,272 | ||
| Total liabilities and shareholders' equity | $ | 2,200 | |
| How would Executive Fruitâs financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.) |
| Dividends fall by $ . Therefore, the requirement for external financing falls from $ to $ . On the other hand, shareholders' equity will be increased by $ . |
| The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.): |
| Long-term debt | $ |
| Shareholders' equity | |
| Total | $ |
Related questions
| The following is the financial statement of Executive Fruit Company for the year ended December 2014. |
| INCOME STATEMENT, 2014 | |||
| (Figures in $ Thousands) | |||
| Revenue | $ | 9,500 | |
| Cost of goods sold | 8,550 | ||
| EBIT | $ | 950 | |
| Interest | 190 | ||
| Earnings before taxes | $ | 760 | |
| State and federal tax | 304 | ||
| Net income | $ | 456 | |
| Dividends | 304 | ||
| Additions to retained earnings | $ | 152 | |
| BALANCE SHEET (Year-End, 2014) | |||
| (Figures in $ Thousands) | |||
| Assets | |||
| Net working capital | $ | 950 | |
| Fixed assets | 3,800 | ||
| Total assets | $ | 4,750 | |
| Liabilities and shareholders' equity | |||
| Long-term debt | $ | 1,900 | |
| Shareholders' equity | 2,850 | ||
| Total liabilities and shareholders' equity | $ | 4,750 | |
| The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015. |
| First stage pro forma statements: |
| PRO FORMA INCOME STATEMENT, 2015 | |||
| (Figures in $ Thousands) | |||
| Revenue | $ | 10,450 | |
| Cost of goods sold | 9,405 | ||
| EBIT | $ | 1,045 | |
| Interest | 190 | ||
| Earnings before taxes | $ | 855 | |
| State and federal tax | 342 | ||
| Net income | $ | 513 | |
| Dividends | 342 | ||
| Additions to retained earnings | $ | 171 | |
| PRO FORMA BALANCE SHEET (Year-End, 2015) | |||
| (Figures in $ Thousands) | |||
| Assets | |||
| Net working capital | $ | 1,045 | |
| Fixed assets | 4,180 | ||
| Total assets | $ | 5,225 | |
| Liabilities and shareholders' equity | |||
| Long-term debt | $ | 1,900 | |
| Shareholders' equity | 3,021 | ||
| Total liabilities and shareholders' equity | $ | 4,921 | |
| Required external financing | $ | 304 | |
| Second stage pro forma balance sheet: |
| PRO FORMA BALANCE SHEET (Year-End, 2015) | |||
| (Figures in $ Thousands) | |||
| Assets | |||
| Net working capital | $ | 1,045 | |
| Fixed assets | 4,180 | ||
| Total assets | $ | 5,225 | |
| Liabilities and shareholders' equity | |||
| Long-term debt | $ | 2,204 | |
| Shareholders' equity | 3,021 | ||
| Total liabilities and shareholders' equity | $ | 5,225 | |
| How would Executive Fruitâs financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.) |
| Dividends fall by $ . Therefore, the requirement for external financing falls from $ to $ . On the other hand, shareholders' equity will be increased by $ . |
| The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.): |
| Long-term debt | $ |
| Shareholders' equity | |
| Total | $ |
