CHAPTER 4: LONG-TERM FINANCIAL PLANNING AND GROWTH DI SEDIAKAN OLEH: CHAN KAR KIAT LOU SUN MIN LOW

WENG WAI LILIS SURJANA BT NASIB NORELIA EDAYU ABD DERAMAN QUESTION 10 APPLYING PERCENTAGE OF SALES MATERNITY BLISS, INC. Balance sheet

A120817 A121105 A116449 A113089 A113170

Asset s Current assets Cash A/C Receivable Inventory Total Fixed assets Net plant and equipment 3000 0 103 Percentage of sales (%)

Liabilities and Owner's Equity Current liabilities A/C Payable Notes Payable Total Long-term debt Owner's equity Common stock and paidin surplus Retained earnings Total 1500 0 2025 1702 5 4702 5 n/a Percentage of sales (%)

3525 7500 6100 1702 5

12 26 21 59

3000 7500 1050 0 1950 0

10 n/a n/a n/a

n/a n/a n/a

Total assets

4702 5

162

Total liabilities and owner's equity

MATERNITY BLISS, INC INCOME STATEMENT

Sales Cost (39% of sales) Taxable income Taxes (34%) Net income Dividends Addition to retained earnings 5640.17 7786.53 33350 13006.5 20343.5 6916.79 13426.71

QUESTION 11 EFN AND SALES

Assets Present year () Current assets Cash A/C Receivable Inventory Total Fixed assets Net plant and equipment 34500 4500 6900 19578.7 5 Owner's equity Common stock and paid-in surplus Retained 9811.53 7786.53 15000 0 900 2554 Total Long-term debt 10950 19500 450 n/a 4053.75 8625 529 1125 A/C Payable Notes Payable 3450 7500 450 0 Change from previous year () Current liabilities Liabilities and Owner's Equity Present year () Change from previous year ()

earnings Total Total assets 54078.7 5 7054 Total liabilities and owner's equity External financing needed 1182.78 -1182.78 24811.5 3 55261.5 3 8236.53 7786.53

QUESTION 12 INTERNAL GROWTH ROA = 13% b = 78% (100%-22%) Internal Growth Rate = ROA * b 1-ROA*b = 0.13*0.78 1-(0.13*0.78) = 11.28% QUESTION 15 SUSTAINABLE GROWTH Profit margin = 8.9% *ROE = 0.089*0.55*1.6 Capital intensity ratio = 0.55 = 0.078 Debt-equity ratio = 0.60 *1.6 = Equity multiplier Net income = $29000 = 1+Debt-equity ratio Dividends = $12000 Sustainable growth rate = ROE*b 1-ROE*b = 0.078*17/29 1-(0.078*17/29) = 0.0479 @ 4.8% QUESTION 16 FULL-CAPACITY SALES Fixed asset capacity = 85% Current sales = KRW 510000 Full-capacity sales = 510 000 0.85 = KRW600000 So,

= 600000-510000 100% 510000 = 17.6% This tells us that sales could increase by almost 17.6%from KRW 510000 to KRW 600000 before any new fixed assets would be needed.

QUESTION 25 CALCULATING EFN WARTSAW BAGELS INCOME STATEMENT

PLN Sales Cost(78%) other expenses earnings before interest and taxes interest paid taxable income taxes 35% net income dividends addition to retained earnings 50820.9 76231.2 PL 1040750 811785 13800 215165 19700 195465 68412.75 127052.25

WARSAW BAGETS BALANCE SHEET

Assets PLN Current assets cash accounts receivable 28750 49450 3780 6450 accounts payable notes payable 74750 9000 9750 0 PLN current liabilities Liabilities and Owners equity PLN PLN

inventory total fixed assets net plant and equipment

87400 165600

11400 21600

total long-term debt owners'' equity

83750 156000

9750

418600

54600

common stock and paid-in surplus retained earnings

21000

333231. 2 593981. 2

76231.2 85981.2

Total assets

584200

76200

total

EFN = -PLN 9781.2

QUESTION 26 CAPACITY USAGE AND GROWTH

Capacity Full capacity sales

= 80% = 90500 80% = PLN 1131200 Ratio of fixed assets to sales =364000 1131200 =0.32 Fixed asset =905000*115%*0.32 =PLN 333040 Compared to the PLN 418600 we originally projected this is PLN 85560 less, so EFN is PLN 95341.2(-PLN9781.2-PLN85560)