Comparative income statements and balance sheets for Best Buy are shown below ($ millions).

Required:
a. Use the following ratios to prepare a projected income statement, balance sheet, and statement of cash flows for Year 3.
Sales growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.67%
Gross profit margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.96%
Selling, general, and administrative expense/Sales. . . . . . . . . . . . . . . . . . . 14.69%
Depreciation expense/Prior-year PPE gross. . . . . . . . . . . . . . . . . . . . . . . . . . 15.28%
Income tax expense/Pretax income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.22%
Accounts receivable turnover (Sales/Accounts receivable). . . . . . . . . . . . . . 48.96
Inventory turnover (Cost of goods sold/Inventory). . . . . . . . . . . . . . . . . . . . . 6.94
Accounts payable turnover (Cost of goods sold/Accounts payable). . . . . . . . 4.96
Taxes payable/Tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.84%
Total assets/Stockholders’ equity (financial leverage) . . . . . . . . . . . . . . . . . 2.55
Dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.00
Capital expenditures/Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.71%
b. Based on your initial projections, how much external financing (long-term debt and/or stockholders’ equity) will Best Buy need to fund its growth at projected increases insales?

Transcribed Image Text:

Year 2 Year 1 Income Statement Net sales. Cost of goods.. Gross profit Selling, general, and administrative expense Depreciation and amortization expense Income before tax. Income tax expense Net income 15,326 $12,494 12,267 10,101 3,059 2,393 2,251 1,728 103 562 215 . .. $ 396 347 . .. 167 641 245 208 Outstanding shares.. Balance Sheet Cash Receivables . . .. Inventories . Other current assets Total current assets. .. 200 746 751 262 1,7671,184 41 313 . 2,928 2,238 Property, plant, and equipment.. Accumulated depreciation Net property, plant, and equipment Other noncurrent assets 1,9871,093 395 543 1,444 698 59 Accounts payable and accrued liabilities Short-term debt and current maturities of long-term debt Income tax liabilities.. Total current liabilities 2,473 1,704 16 65 114 127 2,714 1,785 100 15 115 Long-term liabilities. . 122 181 Total long-term liabilities... _ . ..303 20 576 1,225 Common stocke 20 247 828 1,8211,095 Capital surplus Retained earnings.. Shareholders' equity Total liabilities and equity . . . .