1. Financial Forecasting

Please refer to the financial statements below to answer the following questions:

a. What was the increase in retained earnings of Dylans during 2016?

b. Sales are projected to increase by 15 percent next year. The profit margin and the dividend payout ratio are projected to remain constant. What is the projected addition to retained earnings for next year?

c. Assume a constant net profit margin and dividend payout ratio, and further assume all of Dylans assets and current liabilities vary directly with sales. Assume long-term debt and common stock remain unchanged. Sales are projected to increase by 10 percent. What is the external financing need for next year?

Dylans Income Statement For the Year ended 12/31/2016
Net Sales	$ 17,300,000
Cost of goods sold	10,600,000
Depreciation	3,250,000
Earnings before interest and taxes	$ 3,450,000
Interest expense	6,800,000
Earnings before tax	$ 2,770,000
Income tax expense	940,000
Earnings after tax	$ 1,830,000
Dividends	$ 450,000

Dylans Balance Sheet As of 12/31/2016
Asset		Liabilities
Cash	$350,000	Accounts payable	$1,920,000
Accounts receivable	940,000	Long-term stock	$3,500,000
Inventory	2,360,000	Stock Holders Equity
Total Current Assets	$3,650,000	Common stock	$7,500,000
Net fixed assets	$10,850,000	Retained earnings	$1,580,000
Total assets	$14,500,000	Total assets & Equity	$14,500,000

d. Calculate the ratios below for Dylans and compare them to the industry average.

Ratio	Ratios for Dylans Enterprises	Industry Average	Better (B) or Worse (W) than industry average
Profit margin		0.125
Collection period		25 days
Asset turnover		1.10
Payables period		35 days
Debt-to-assets		0.30
Gross margin		0.42

2. Budgeting Cash Receipts

Garcia Manufacturing Companys sales, half of which are for cash and the other half sold on credit, over the past three months were:

August	$360,000
September	320,000
October	280,000

a. Estimate Garcias cash receipts in October if the companys collection period is 30 days.

b. Estimate Garcias cash receipts in October if the companys collection period is 45 days.

c. What would be the October balance of accounts receivable for Garcia Manufacturing if the companys collection period is 30 days? 45 days?

3. Managing Growth

Selected financial information for Knopfler Engineering is presented below:

Indicator/Year	2010	2011	2012	2013	2014	2015
Sales	477.84	491.62	706.52	792.01	876.52	1,088.46
Net Income	-	43.27	26.31	38.48	44.84	25.76
Total Assets	-	477.06	648.42	644.26	697.16	982.63
Equity	-	346.32	426.01	465.85	432.91	553.27
Dividends	-	-	-	0.80	1.65	2.22

Use the information from Knopflers annual financial statements to answer the following questions:

a. Calculate the actual and sustainable growth rate for each year.

b. Do you think Knopfler Engineering is having a problem financing its growth?

c. Is the increase in dividends a good idea for Knopfler?

4. Sources and Uses Statement

a. Use the information below to prepare a statement of sources and uses for Little Feat.

Little Feat Comparative Balance Sheets (in thousands)
	2016	2015	Change
Cash	76	46	30
Accounts receivable	138	86	52
Inventory	206	166	40
Prepaid expenses	12	15	(3)
Building & equipment	272	246	26
Accumulated Depreciation	(76)	(54)	(22)
Total assets	628	505	123
Accounts payable	90	68	22
Income tax payable	16	18	(2)
Bonds payable	118	115	3
Common stock	200	180	20
PIC in excess	100	46	54
Retained earnings	104	78	26
Total liabilities & equity	628	505	123

Little Feat Income Statement For the year ending 12/31/2016 (in thousands)
Sales		416
Cost of goods sold	266
Depreciation expense	22
Other expenses	50
Interest expense	6
Income tax expense	18
	362	362
Net Income		54
Other Items: Dividends paid		28