Major Manuscripts, Inc. 2012 Income Statement

Net sales

$

7,800

Cost of goods sold

6,865

Depreciation

210

Earnings before interest and taxes

$

725

Interest paid

31

Taxable Income

$

694

Taxes

284

Net income

$

410

Dividends

$

187

Major Manuscripts, Inc.
2012 Balance Sheet

2012

2012

Cash

$

2,400

Accounts payable

$

1,550

Accounts rec.

880

Long-term debt

300

Inventory

2,700

Common stock

$

3,100

Total

$

5,980

Retained earnings

4,430

Net fixed assets

3,400

Total assets

$

9,380

Total liabilities & equity

$

9,380

Major Manuscripts, Inc., is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. In 2013, no new equity will be raised and sales are projected to increase by 10 percent. Construct the pro formas for 2013 and answer the following questions (show your work!).

Projected total assets= $
Projected retained earnings= $
Additional new debt required= $

Projected total assets = $10,318

Projected retained earnings = $4,675.30

Additional new debt required = $537.70

Explanation:

external financing needed ( EFN )= [(total assets/total sales) x ( sales )] - [(total current liabilities/total sales) x ( sales )] - [profit margin x forecasted sales in $ x (1 - dividend payout ratio)]

total assets = $9,380,

projected total assets = $9,380 x 1.1 = $10,318

total sales = $7,800

sales = $780

current liabilities = $1,550

profit margin = net income / sales

= $410 / $7,800

= 0.052564

forecasted sales = $7,800 x 1.1 = $8,580

dividends payout ratio = dividends / net income

= $187 / $410

= 0.4561

Therefore:

EFN = [($9,380/$7,800) x ($780)] - [($1,550/$7,800) x ($780)] - [0.052564 x $8,580 x (1 - 0.4561)]

EFN = $938 - $155 - $245.30

EFN = $537.70

projected retained earnings = current retained earnings - projected net income - projected dividends

= $4,430 + $451 - $205.70

= $4,675.30

steering wheels are always situated on the left side of the car.

always drive on the right side of the road.

white lines separate lanes of traffic traveling the same direction.

hashed or broken lines means you may change lanes when it is safe.

solid white lines mean stay in your lane.

yellow lines separate traffic moving in opposing directions.

hashed or broken yellow lines mean you can carefully pass, paying attention to oncoming traffic.

never cross a solid yellow line (or double yellow line).

when turning left at an intersection, pass in front of any cars that are turning left from the opposing direction (do not try to pass behind them).

use the left lane to pass other cars traveling your direction.

do not pass in the right lane unless absolutely necessary.

if you are driving in the far left hand lane and someone would like to pass you, move over to the right lane when it is safe to do so and allow them to pass.

you must always yield to pedestrians.

come to a complete stop whenever you see pedestrians trying to cross the street.

never pass a school bus if it has flashing red lights. wait until the lights have stopped.

be aware of bicyclists. often they share the road with cars and are supposed to also follow general traffic laws.

be particularly careful about driving in cities with bike lanes -- always check before turning that a bike is not coming.

it is mandatory to pull over or stop at an intersection to allow an emergency vehicle to pass you if you see one traveling with lights flashing and/or a siren running.

do not overuse your car horn. horns are used almost exclusively for emergency situations or for when you feel unsafe.

explanation:

a. money supply  

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