Finance 486 Final Exam

Topics: Generally Accepted Accounting Principles, Balance sheet, Revenue Pages: 8 (1459 words) Published: April 13, 2015
 Finance 486 Final Exam

1. EFN Calculation – 25 points
The most recent Financial Information for Golf Pro Inc. are shown here: Income Statement Balance Sheet Sales $3,400 Current Assets $4,400 Current Liabilities $880 Costs 2,800 Fixed Assets 5,700 Long Term Debt 3,580 Taxable Income 600 Equity 5,640 Taxes @ 34% 204 Total 10,100 Total $10,100 Net Income $ 396

Assets, costs and current Liabilities are proportional to sales. Long –term Debt and equity are not. The company maintains a constant 50% dividend payout ratio. As with every other firm in its industry, the next year’s sales are projected to increase by exactly 15%. What is the external financing needed?

The formula used for calculating EFN is
Assets/Sales (Forecasted Sales – Sales) – (Sales – Liabilities)/Sales (Forecasted Sales – Sales) – (Net Income/Sales)(Forecasted Sales)(Addition to Retained Earnings / Net Income)

EFN = 10,100 / 3,400 (3,910 – 3,400) – (3400 – 880)/3400 (3,910/3,400) – (210 – 1200)(3910)(198)
= 1,155.30
The external financing needed for Golf Pro Inc. will be $1,155,30.

2. Financial Statement Analysis – 25 points
The Financial Statements for Johnson Inc. for the year ended December 31, 2009, follow. Johnson Inc Johnson Inc
Income Statement Balance Sheet
For the year ended December 31, 2009 For year ended December 31, 2009

Sales Revenue$160,000 Assets
Less: Cost of goods sold 106,000 Cash$ 500 Gross profits $ 54,000Marketable Securities 1,000 Less: Operating ExpensesAccounts Receivable 25,000 Selling Expenses $ 16,000 Inventories 45,500 General and Admin 10,000 Total Current Assets $ 72,000 Lease Expense 1,000Land $ 26,000 Depreciation 10,000Buildings & Equip 90,000 Total Operating Expense $ 37,000 Less : Accumulated Depreciation 38,000 Operating Profits $ 17,000 Net Fixed Assets $ 78,000 Less: Interest Expense 6,100 Total Assets $ 150,000 Net Profits before Taxes $ 10,900

Less: Taxes 4,360 Liabilities and Stockholders’ Equity Net profit after taxes $ 6,540 Accounts Payable $ 22,000 Notes Payable 47,000

Total Current Liabilities $ 69,000
Long Term Debt $ 22,950
Common Stock $ 31,500
Retained Earnings $ 26,550
Total Liabilities and Equity $ 150,000

Use the preceding financial information to complete the following table. Assume the industry averages given in the table are applicable for both 2008 and 2009. RatioIndustry AvgActual 2008Actual 2009

Current Ratio 1.80 1.84
Quick Ratio .70 .78 Inventory turnover 2.50 2.59 Average...
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