Texas Company has begun selling a new chili recipe and they want you to help them with next years budgeted financial statements. Using the worksheet below, complete Texas Company forecast and answer the questions which follow.

Assumptions:

To begin with, Texas Company is sure sales will grow 50% next year. Assume that is true. Then assume that COGS, Current Assets, and Current Liabilities all vary directly with Sales (that means if sales grows a certain percentage, then the account in question will grow by that same percentage). Assume that fixed expenses will remain unchanged and that $3,000 worth of new Fixed Assets will be obtained next year. Lastly, the current dividend policy will be continued next year.

Texas Company

Financial Forecast

Estimated

This year for next year

Sales $25,000 _______

COGS 5,000 _______

Gross Profit 20,000 ______

Fixed Expenses 3,000 _______

BeforeTax Profit 17,000 _______

Tax @ 33.3333% 5,666 _______

Net Profit 11,334 _______

Dividends $0 ________

Current Assets $30,000 _________

Net Fixed Assets 20,000 _________

Total Assets $50,000 _________

Current Liabilities $18,000 _________

Longterm debt 3,000 _________

Common Stock 9,000 __ _____

Retained Earnings 13,000 _________

Total Liabs & Eq $43,000 _________

Amount need to balance the balance sheet __________

(Projected total assets minus projected

total liabilities & equity *)

* If this number is positive it means Texas Company need additional external funding to finance their projected asset growth. If this number is negative it means Texas Company has programmed too much financing for the amount of assets they project.