Question 1 FlyByNight Enterprises (FlyByNight) wants you to prepare financial plans for 2018. The following financial statement and other information are provided to assist you: FlyByNight Enterprises Balance Sheet for Year Ended 31 December 2017 Assets Liabilities Cash $48,000 Accounts payable $360,000 Marketable securities 18,000 Accruals 90,000 Accounts receivable 300,000 Notes payable 160,000 Inventories 420,000 Total current liabilities 610,000 Total current assets 786,000 Non-current debt 350,000 Net non-current assets 814,000 Share capital 340,000 Retained earnings 300,000 1600.000 $1.600.000 Other information: i) ii) 111) Sales for 2017 were $3,000,000. Forecasted sales for 2018 are $4,000,000. Use the per cent-of-sales method to determine the 2018 balances for cash, marketable securities, accounts receivable and inventories. FlyByNight Ltd has no excess capacity in its production facilities and must therefore increase its investment in non-current assets by $200,000. Total depreciation for 2018 is estimated to be $64,000. Accounts payable and accruals will increase spontaneously in proportion to the increase in sales (i.e. use per cent-of-sales method). Notes payable, non-current debt, share capital are expected to remain unchanged. The ratio of net income to sales (i.e. net profit margin) is expected to remain at 5%, and the dividend is expected to be 60 per cent of net income. iv) v) vi) Required a) Prepare a pro forma balance sheet for year ended 31 December 2018 for FlyByNight Enterprises. [7 marks] b) How much, if any, additional external financing (EFN) will be required by FlyByNight in 2018? Discuss. [1 mark] c) What constraint(s) listed in other information above could be changed if any additional external financing required cannot be obtained? What could the impact of your suggested changes be on risk and return for FlyByNight? [4 marks] Question 1 FlyByNight Enterprises (FlyByNight) wants you to prepare financial plans for 2018. The following financial statement and other information are provided to assist you: FlyByNight Enterprises Balance Sheet for Year Ended 31 December 2017 Assets Liabilities Cash $48,000 Accounts payable $360,000 Marketable securities 18,000 Accruals 90,000 Accounts receivable 300,000 Notes payable 160,000 Inventories 420,000 Total current liabilities 610,000 Total current assets 786,000 Non-current debt 350,000 Net non-current assets 814,000 Share capital 340,000 Retained earnings 300,000 1600.000 $1.600.000 Other information: i) ii) 111) Sales for 2017 were $3,000,000. Forecasted sales for 2018 are $4,000,000. Use the per cent-of-sales method to determine the 2018 balances for cash, marketable securities, accounts receivable and inventories. FlyByNight Ltd has no excess capacity in its production facilities and must therefore increase its investment in non-current assets by $200,000. Total depreciation for 2018 is estimated to be $64,000. Accounts payable and accruals will increase spontaneously in proportion to the increase in sales (i.e. use per cent-of-sales method). Notes payable, non-current debt, share capital are expected to remain unchanged. The ratio of net income to sales (i.e. net profit margin) is expected to remain at 5%, and the dividend is expected to be 60 per cent of net income. iv) v) vi) Required a) Prepare a pro forma balance sheet for year ended 31 December 2018 for FlyByNight Enterprises. [7 marks] b) How much, if any, additional external financing (EFN) will be required by FlyByNight in 2018? Discuss. [1 mark] c) What constraint(s) listed in other information above could be changed if any additional external financing required cannot be obtained? What could the impact of your suggested changes be on risk and return for FlyByNight? [4 marks]
