Cheryl Colby, CFO of Charming Florist Ltd., has created the firm’s pro forma balance sheet for the next fiscal year. Sales are projected to grow by 15 percent to $317.4 million. Current assets, fixed assets, and short-term debt are 20 percent, 90 percent, and 15 percent of sales, respectively. Charming Florist pays out 40 percent of its net income in dividends. The company currently has $40 million of long-term debt, and $20 million in common stock par value. The profit margin is 10 percent.
a. Construct the current balance sheet for the firm using the projected sales figure.
b. Based on Ms. Colby’s sales growth forecast, how much does Charming Florist need in external funds for the upcoming fiscal year?
c. Construct the firm’s pro forma balance sheet for the next fiscal year and confirm the external funds needed that you calculated in part (b).