finance management

QUESTION NO. 1 (10 MARKS) a. The income statement and balance sheet for the ABC Co. for the year ended December 31, 2019. Income Statement ABC Company For the Year Ended December 31, 2019 Sales $300,000 Less: Cost of Goods Sold 195.000 Gross Profit $105,000 Less: Selling Expense 40,000 General & Administrative Expense 11,000 Less: Depreciation 10.000 Operating Profit $ 44,000 Less: Interest 12,000 Net Profit Before Taxes $ 32,000 Less: Taxes (40%) 12,800 Net Income $ 19.200 Balance Sheet ABC Company For the Year Ended December 31, 2019 Cash 1,500 Accounts Receivable 60,000 Inventory 95.000 Total Current Assets $156,500 Net Plant and Equipment 150,000 Total Assets $306.500 Liabilities and Equities Accounts Payable $ 45,500 Notes Payable 55,000 Accruals 5,500 1 Total Current Liabilities $105,500 Long-Term Debt 55,000 Stockholders' Equity: Common Stock 71,000 Retained Earnings 75.000 Total Liabilities and Equities $306.500 The ABC Co. has been requested by the Ist National Bank, a major creditor, to prepare a pro forma balance sheet for the year ending, December 31, 2020. Using the percent-of-sales method and the following financial data, prepare the pro forma income statement and balance sheet and also use the simple formula to determine the external funds needed by the company. Discuss the resulting external financing required. Assumptions 2020 sales are expected to increase by 30%. Accounts receivable represent 20% of sales and Accounts payable represents 15% of sales. Inventory represents 32% of sales. Fixed-asset outlays in 2020 are $20,000. Total depreciation expense for 2020 will be $15,000. No long-term debt will be retired in 2020 and no common stock will be repurchased in 2020. The firm will pay dividends equal to 20% of its earnings after taxes