Comparative income statements and balance sheets for ABC Limited shown below ($ millions).
ABC Limited is a company that
PL 2023 2022
Net sales 20,500 20,000
COGS 7,100 6,300
Gross Profit 13,400 13,700
Selling and GA Expense 8,000 9,000
Depre and Amort Expense 850 800
Interest Expense 250 300
Income before tax 4,300 3,600
Income tax expense 946 792
Net Income 3,354 2,808
Outstanding shares 800 800
BS 2023 2022
Cash 2,000 1,900
Receivables 2,004 1,800
Inventories 2,100 1,050
Other current assets 2,500 2,120
Total current assets 8,604 6,870
Property, plant, and equipment 7,500 6,800
Accumulated depreciation 2,700 2,500
Net property, plant, and equipment 4,800 4,300
Other noncurrent assets 11,220 10,200
Total assets 24,624 21,370
Accounts payable and accrued liabilities 4,400 4,400
Short-term debt and current maturities 1,000 500
Income tax liabilities 300 250
Total current liabilities 5,700 5,150
Deferred income taxes and other liabilities 1,500 1,400
Long-term debt 4,300 5,400
Total noncurrent liabilities 5,800 6,800
Common stock 1000 1000
Additional PIC 3,600 3,250
Retained earnings 8,524 5,170 -
Shareholders’ equity 13,124 9,420
Total liabilities and equity 24,624 21,370
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ted shown below ($ millions). ABC Limited is a company that sells drinks.
Rasio
Sales growth 2.50%
Gross profit margin 65.37%
Selling and GA expense 39.02%
Depreciation expense/Prior-year PPE gross 12.50%
Interest expense/Prior-year long-term debt 4.24%
Income tax expense/Pretax income 22.00%
Accounts receivable turnover 10.23
Inventory turnover 3.38
Accounts payable turnover 1.61
Taxes payable/Tax expense 31.71%
Total assets/Stockholders’ equity (financial leverage) 1.88
Dividends per share ($) 1.40
Capital expenditures/Sales 5.00%
Current maturity for Debt in 2024 ($ in million) 1,500
Question :
a. Use the following ratios to prepare a projected income statement, balance sheet, and
statement of cash flows for year 2024
b. Based on your initial projections, how much external financing (long-term debt and/or
stockholders’ equity) will ABC Limited need to fund its growth at projected increases in sales?
(no wrong answer)
A.1 Income Statement
PL 2024 projected 2023 2022
Net sales 21,012 20,500 20,000
COGS 7,277 7,100 6,300
Gross Profit 13,735 13,400 13,700
Selling and GA Expense 8,200 8,000 9,000
Depre and Amort Expense 938 850 800
Interest Expense 225 250 300
Income before tax 4,373 4,300 3,600
Income tax expense 962 946 792
Net Income 3,411 3,354 2,808
Outstanding shares 800 800 800
A.2 Balance Sheet
BS 2024 projected 2023 2022
Cash 3,190 2,000 1,900
Receivables 2,054 2,004 1,800
Inventories 2,152 2,100 1,050
Other current assets 2,500 2,500 2,120
Total current assets 9,897 8,604 6,870
Property, plant, and equipment 8,551 7,500 6,800
Accumulated depreciation 3,638 2,700 2,500
Net property, plant, and equipment 4,913 4,800 4,300
Other noncurrent assets 11,220 11,220 10,200
Total assets 26,030 24,624 21,370
Accounts payable and accrued liabilities 4,510 4,400 4,400
Short-term debt and current maturities 1,500 1,000 500
Income tax liabilities 305 300 250
Total current liabilities 6,315 5,700 5,150
Deferred income taxes and other liabilities 1,500 1,500 1,400
Long-term debt 2,800 4,300 5,400
Total noncurrent liabilities 4,300 5,800 6,800
Common stock 1,000 1,000 1,000
Additional PIC 3,600 3,600 3,250
Retained earnings 10,815 8,524 5,170
Shareholders’ equity 15,415 13,124 9,420
Total liabilities and equity 26,030 24,624 21,370
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A.3 Cash Flow << indirect
Net Income 3,411
Items to adjust income to cash flows :
Depreciation and amortization 938
Receivables - 50
Inventories - 52
Account payable & accrued liabilities 110
Income Tax and others 5
Net cash flow operations 4,361
Capital Expenditure - 1,051
Net cash flow investing activities - 1,051
Long term debt - 1,000
Dividends - 1,120
Net cash flow from financing activities - 2,120
Net change in cash 1,190
Beginning cash 2,000
Ending cash 3,190
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external financing (long-term debt and/or stockholders’ equity)
no need external financing as of now since net cash flow operating is sufficient enough to cover the investing and financing ac
This will be a different story if there are any scheme to expand the business by acquiring a new company/bigger capital expen
PY sales*%growth sales
Sales*%GPM
sales*%selling and GA Expense
PY PPE Gross*(Depreciation expense/Prior-year PPE gross)
PY Debt*(Interest expense/Prior-year long-term debt)
Income before tax*Income tax expense/Pretax income
no change
balancing(at the end)
Sales/Receivable turnover
COGS/Inventory turnover
no change
PY balance+capex estimates (capex/sales percentage)
PY balance+depre estimates
no change
COGS/payable turnover
based on maturity stated
tax expense*(PY tax payable/tax expense)
no change
PY-CY current debt maturity
no change
no change
RE beg.year+NI-dividend
nough to cover the investing and financing activities.
cquiring a new company/bigger capital expenditure, etc
Rasio
Sales growth 2.50%
Gross profit margin 65.37%
Selling and GA expense 39.02%
Depreciation expense/Prior-year PPE gross 12.50%
Interest expense/Prior-year long-term debt 4.24%
Income tax expense/Pretax income 22.00%
Accounts receivable turnover 10.23
Inventory turnover 3.38
Accounts payable turnover 1.61
Taxes payable/Tax expense 31.71%
Total assets/Stockholders’ equity (financial leverage) 1.88
Dividends per share ($) 1.40
Capital expenditures/Sales 5.00%
Current maturity for Debt in 2024 ($ in million) 1,500
dividen
1120
