K M N 5.10% A B D G H Your CFO sends you, the Director of Finance, a memo stating that the company must maintain the following ratios in order to remain 2 competitive in capital markets and avoid violating bond covenants. Calculate the projected income statement and balance sheet 3 that would be necessary achieve these ratios. 4 5 Hint: you cannot calculate each row in order. Begin by calculating net income based on the required dividend ratios. If you are having 6 trouble solving for other rows, I recommend writing out the formulas for each ratio. Then, if you are trying to solve for A/R, for example, 7 you can see which ratios include A/R in them. 8 9 Dividend payout 45.00% Profit margin 110 Market price $15.00 Gross margin 27.60% 11 Dividend yield 5.20% Return on assets 9.40% 12 Shares outstanding 18,000 Inventory turnover 733.30% 13 Return on equity 13.70% Operating profit margin 8.70% 14 Long-term debt/equity 27.30% Days sales outstanding 92.5 15 Current ratio 551.00% Days payables outstanding 28.7 16 Acid-test ratio 407.30% Tax rate 34.00% 17 18 19 Your Company Your Company 19 Target Income Statement Targeted Balance Sheet 20 For the Year Ended 12/31/20 12/31/2020 21 Sales Cash Accounts payable 22 Cost of sales Accounts receivable Other current liabilities 23 Gross profit Inventory Total current liabilities 24 SG&A Tatal current assets Long-term debt 25 Operating profit PP&E.net Total liabilities 26 Interest Owners' equity 27 27 Earnings before taxes Total assets Total liabilities and owners' equity 28 Taxes 29 Net income 30