Proforma Winter 2023 Exam Question The actual 2023 balance sheet and partially completed 2024 projected financial statements
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Proforma Winter 2023 Exam Question
The actual 2023 balance sheet and partially completed 2024 projected financial statements for MBA, Inc. are shown on the next page. Use this financial data along with the assumptions below to complete the projected statements for 2024 by filling in the boxes. All the data are in $ millions.
Be careful. Each box is worth one point and there is no partial credit! Negative numbers (e.g., expenses on the income statement, etc.) must be shown in parentheses. I strongly encourage you to use pencil. ROUND all calculations to the nearest million dollars!
Make the following assumptions when completing the financial statements:
- Sales were $4,500 million in 2023.
- Expected sales growth for 2024 is 10%, and the expected income tax rate is 25%.
- Inventory turnover (Cost of Goods Sold/Average Inventory) was equal to 3.6 in 2023. The same inventory turnover is expected for 2024.
- The only investing activities in 2024 relate to (i) the expected purchase of new Plant, Property, and Equipment (PPE) for $1,260 million in cash, and (ii) the expected sale at cost of a piece of land that is not being used in order to raise cash.
- MBA, Inc. has no plans to issue common stock, but the firm will repurchase and immediately retire some common stock during 2024.
| MBA, Inc. Projected Financial Statements for 2024 | ||
| Balance Sheet (at year end) | 2024 | 2023 |
| Cash | 100 | 25 |
| Accounts Receivable | 175 | |
| Inventory | 750 | |
| PPE | 7125 | 5975 |
| Less: Accumulated depreciation | (3925) | (2925) |
| Total Assets | 4000 | |
| Accounts payable | 330 | |
| Short term debt (STD) | 656 | 756 |
| Long term debt (LTD) | 1500 | |
| Total Liabilities | 2586 | |
| Common Stock | 425 | 495 |
| RE | 1026 | 919 |
| Total Stockholders' Equity | 1451 | 1414 |
| Total liabilities and TSE | 4000 | |
| Income Statement | ||
| Net Sales | ||
| Cost of Goods Sold | ||
| Operating Expenses | ||
| Interest expense | (156) | |
| Income (Loss) Before Taxes | ||
| Income tax expense | (120) | |
| Net Income (Loss) | 360 | |
| Statement of Cash Flows | ||
| Net Income (Loss) | 360 | |
| Depreciation Expense | 1000 | |
| Change in Accounts Receivable | 20 | |
| Change in Inventory | ||
| Change in Accounts Payable | 228 | |
| Cash Flow from Operations | ||
| Acquisition of PPE | ||
| Sale of PPE | ||
| Cash flow from Investing | (1150) | |
| Net STD issued(repaid) | ||
| Net LTD issued(repaid) | 190 | |
| Common Stock Issued (Repurchased) | ||
| Dividends | ||
| Cash Flow from Financing | ||
| Increase (Decrease) in cash |
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