47) Holding all other variables constant, as the dividend payout ratio decreases, the sustainable growth rate increases. Examples: Inventory typically increases with sales and accounts payable increase with inventory. Assume current assets and accounts payable vary as a percent of sales, and fixed assets remain at the present level. 55) If the firm’s current fixed assets are sufficient to support the projected level of new sales, then these assets would be projected to remain unchanged for the forecast period. 54) When fixed expenses increase relative to sales, it indicates that there is not enough productive capacity to absorb an increase in sales. This payment processor is having an underwhelming year relative to the U.S. Momentum profit reverse post 2 year holding periods. The company’s net profit margin on sales is 8%, and the company plans to pay 40% of its after-tax earnings in dividends. Book the profit above 8 % .
Prepare a pro forma balance sheet for Amalgamated for next year using the percent-of-sales method and the information provided above. Fill in the dollar amounts on Au Courant’s pro forma balance sheet assuming 2015 sales are $450,000. Construct a pro forma balance sheet for March 31, 2015 for an expected level of sales of $45 million. 49) Pro forma statements are important since they formally report the performance of the firm during a previous reporting period. Current assets are $3 million and fixed assets are $4 million. Budgets compare historical costs of the firm with its current cost performance. The common unique boutique holders received all net earnings of the firm in the form of cash dividends, leaving no funds from earnings available to the firm for expansion (assume that depreciation expense is just equal to the cost of replacing worn-out assets). Answer: Certain types of financing typically increase “spontaneously” with sales and are “free” in the sense that no interest expense is incurred. Answer: Discretionary financing could be any type of short-term or long-term loan whether it be a line of credit from a bank to finance working capital needs or a major bond issue. Accounts payable are interest-free loans provided by the firm’s vendors to finance inventory purchases.