Chapter? 4
Assignment 2
- RRM ?Inc. determines that sales will rise from AED 8,000,000 to? AED 9,500,000 next year. Spontaneous assets are 60% of sales and spontaneous liabilities are 30% of sales. RRM? has an 7 % profit margin and a 40% dividend payout ratio. What is the level of required new funds? ?
Given the income statement below for Imperial Products Corporation for 2015, and a 20% growth in sales for 2016, prepare a pro forma income statement.
Imperial Products Corp.
Income Statement for 2015
(AED million)
|
Sales Revenue |
28,800,000 |
|
|
COGS |
11,400,000 |
|
|
SG&A Expenses |
6,800,000 |
|
|
Depreciation Expenses |
2,300,000 |
|
|
EBIT |
8,300,000 |
|
|
Interest Expense |
1,200,000 |
|
|
Taxable Income |
7,100,000 |
|
|
Taxes |
2,414,000.00 |
|
|
Net Income |
4,686,000.00 |
? ??????3. Dejlah Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Hamad, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecasted sales figures:
??????????????????????????????????????????????????? (AED million)
???????????????????????????????????????????????????????????????????????????????????????
Actual???????????????????????????????? Forecast?????????????????????? Additional Information
November………….. 200,000?????? January…………. 280,000???? April forecast……. 330,000
December………….. ? 220,000???? February……….. ? 320,000
??????????????????????????????????????????????????????????????????????????? March???…………………… ??? 340,000
Of the firm’s sales, 40 percent are for cash and the remaining 60 percent are on credit. Of credit sales, 30 percent are paid in the month after sale and 70 percent are paid in the second month after the sale. Materials cost 30 percent of sales and are purchased and received each month in an amount sufficient to cover the following month’s expected sales. Materials are paid for in the month after they are received. Labor expense is 40 percent of sales and is paid for in the month of sales. Selling and administrative expense is 5 percent of sales and is also paid in the month of sales. Overhead expense is AED 28 ?million in cash per month.
Depreciation expense is AED 1,000,000 per month. Taxes of? AED 8,000,000 will be paid in January, and dividends of? AED 2 million will be paid in March. Cash at the beginning of January is? AED 15 million, and the minimum desired cash balance is AED 12,000,000.
For January, February, and March, prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowings and repayments.