Part A Balance Sheet Charlie King Manufacturing Co. As at December 31, 2022 and 2023 Assets Current Assets Cash Accounts Receivable Inventories Total Current Assets Gross fixed assets (at cost) Less: Accumulated Amortization Net fixed assets Total assets Liabilities and Shareholders Equity Current Liabilities Accounts Payable December 31 2022 2023 $ $ 24,100 30,000 763,900 846,540 763,445 726,450 1,551,445 1,602,990 1,691,707 2,126,867 348,000 520,000 1,343,707 1,606,867 $2,895,152 $3,209,857 $ $ 400,500 245,450 Line of credit 343,750 326,000 Accruals 100,902 79,550 Total Current Liabilities 845,152 651,000 Long-term debt 700,000 1,180,420 Total Liabilities 1,545,152 1,831,420 Shareholders Equity Preferred Shares 70,000 70,000 Common Shares 300,000 300,000 Retained Earnings 980,000 1,008,437 Total Shareholders Equity 1,350,000 1,378,437 Total Liabilities and Shareholders Equity $2,895,152 $3,209,857 Income Statement Charlie King Manufacturing Co For the Year ended December 31, 2023 Sales revenue $6,050,000 Less: Cost of Goods Sold 4,416,500 Gross Margin 1,633,500 Less: Operating Expenses Selling expense $775,005 General and administrative expenses 496,100 Amortization Expense 172,000 Total Operating Expense 1,443,105 Operating Eamings (EBIT) 190,395 Less: Interest expense 93,000 Eamings before taxes 97.395 Less: Taxes (rate = 40%) 38,958 Net income after taxes $58,437 Historical Ratios Charlie King Manufacturing Co Ratio Industry Actual Actual Actual Average 2021 2022 2023 2023 Current ratio Quick Ratio 1.7 1.8 1.0 0.9 Average age of inventory Average Collection period 70.2days 73 days 1.5 1.2 35.8days 50 days 55 days 46 days Total Asset turnover (times) 1.5 1.5 2.0 Debt ratio 45.8% 53.4% 24.5% Times interest earned ratio 2.2 1.9 2.5 Gross margin 27.5% 28.0% 26.0% Profit margin 1.1% 1.0% 1.2% Return on total assets (ROA) 1.7% 1.5% 2.4% Return on Equity (ROE) 3.1% 3.3% 3.2% The Charlie-King Manufacturing Company Preparing Pro Forma Financial Statements for 2024 Charlie-king Manufacturing is planning to implement a major plant-modernization program to improve its competitive position. Included will be construction of a state-of- the-art manufacturing facility that will cost $600,000 in 2024 and is expected to lower the company's variable cost per tonne of steel. Tony and Pauli, experienced budget analysts, have been charged with preparing a forecast of the firm's 2024 financial position assuming construction of the proposed new facility. They plan to use the 2023 financial statements presented above along with the forecasts for other financial accounts provided in the following table. Key Projected Financial Data (2024) The Charlie-king Manufacturing Company Data Item Value Sales Cost of goods sold Selling Expense General and administrative expense Accumulated Amortization Interest expense Increase to $9,000,000 Remain the same age of sales Increase by 21% Increase by 40% Increase to $700,000 Increase to $110,000 Tax rate 40% Dividend payments $70,000 Average age of inventory 51 days Average collection period 45 days Accruals Average payment period Long-term debt, preferred shares, and common shares: Cash maintained at: Remain the same $30,000 30 days Increase to $100,000 Required Part B: a. Use the historic and projected financial data provided to prepare a pro forma income statement and balance sheet for the year ended December 31, 2024. b. Will Charlie-king Manufacturing Company need to obtain external financing to fund construction of the proposed facility? Explain. Prepare a Statement of EFR. c. How would you recommend Charlie-king raise the required Financing? What options might be available if the company wanted to explore all opportunities other than using their line of credit?