FIN 200: Assignment Workbook Week 3 Solution

FIN 200

Axia College of University of Phoenix (UoP)

Introduction to Finance: Harvesting the Money Tree

Finance 200 Assignment Workbook Week 3 Solution

Week 3 Assignment: Pro Forma Financial Statements

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The Niara Corporation
The balance sheet items of The Niara Corporation that vary directly with sales and the profit margin are as follows:

Percent
Cash 9%
Accounts receivable 11%
Inventory 22%
Net fixed assets 32%
Accounts payable 12%
Accruals 9%
Profit margin after taxes 5%

2009 Sales $2,200 thousand
2010 Sales Increase 14%
Dividend Payout Ratio 40%
2009 Retained Earnings Balance 620.00 thousand
Common Stock 120.00 thousand
Long Term Bonds 80.00 thousand
Notes Payable 346.00 thousand

You must show your work in order to receive credit
a . How much additional external capital will be required for next year given the sales increase as noted above? (Assume that the company is already operating at full capacity.)
b . What will happen to external fund requirements if The Niara Corporation reduces the payout ratio, grows at a slower rate, or suffers a decline in its profit margin? Discuss each of these separately.
c. Prepare a pro forma balance sheet for 2010 assuming that any external funds being acquired will be in the form of notes payable. Disregard the information in part b in answering this question (that is, use the original information and part a in constructing your pro forma balance sheet).

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FIN 200: Assignment Workbook Week 2 Solution

FIN 200

Axia College of University of Phoenix (UoP)

Introduction to Finance: Harvesting the Money Tree

Finance 200 Assignment Workbook Week 2 Solution

Week 2 CheckPoint: Financial Ratios

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Using the financial statements for The Niara Corporation, calculate the 13 basic ratios found in the chapter.
You must show your work to get credit.

Niara Corporation
Income Statement
For the Year Ended December 31, 2009
Sales $ 2,200,000
Cost of goods sold 1,300,000
Gross profits 900,000
Selling and administrative expense 420,000
Depreciation expense 150,000
Operating income 330,000
Interest expense 90,000
Earnings before taxes 240,000
Taxes 80,000
Earnings after taxes 160,000
Preferred stock dividends 10,000
Earnings available to common stockholders $ 150,000
Shares outstanding 120,000
Earnings per share $1.25

Statement of Retained Earnings
For the Year Ended December 31, 2009
Retained earnings, balance, January 1, 2009 $ 500,000
Add: Earnings available to common stockholders, 2009 150,000
Deduct: Cash dividends declared and paid in 2009 30,000
Retained earnings, balance, December 31, 2009 $ 620,000

Niara Corporation
Balance Sheet
December 31, 2009
Year‐End
Assets 2009
Current assets:
Cash $ 135,000
Accounts receivable (net) 340,000
Inventory 405,000
Prepaid expenses 25,000
Total current assets 905,000
Investments (long‐term securities) 50,000
Plant and equipment 2,450,000
Less: Accumulated depreciation 1,150,000
Net plant and equipment 1,300,000
Total assets $ 2,255,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 475,000
Notes payable 400,000
Accrued expenses 60,000
Total current liabilities 935,000
Long‐term liabilities:
Bonds payable, 2009 80,000
Total liabilities 1,015,000
Stockholders’ equity:
Preferred stock, $100 par value 90,000
Common stock, $1 par value 120,000
Capital paid in excess of par 410,000
Retained earnings 620,000
Total stockholders’ equity 1,240,000
Total liabilities and stockholders’ equity $ 2,255,000

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FIN 200: Assignment Workbook Week 1 Solution

FIN 200

Axia College of University of Phoenix (UoP)

Introduction to Finance: Harvesting the Money Tree

Finance 200 Assignment Workbook Week 1 Solution

Week 1 Assignment: Cash Flow Preparation

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Prepare a statement of cash flows for The Niara Corporation.
Follow the general procedures indicated in Table 2–10 on page 38 in your textbook.
You must show your work in order to receive credit.

Niara Corporation
Income Statement
For the Year Ended December 31, 2009
Sales $ 2,200,000
Cost of goods sold 1,300,000
Gross profits 900,000
Selling and administrative expense 420,000
Depreciation expense 150,000
Operating income 330,000
Interest expense 90,000
Earnings before taxes 240,000
Taxes 80,000
Earnings after taxes 160,000
Preferred stock dividends 10,000
Earnings available to common stockholders $ 150,000
Shares outstanding 120,000
Earnings per share $1.25

Statement of Retained Earnings
For the Year Ended December 31, 2009
Retained earnings, balance, January 1, 2009 $ 500,000
Add: Earnings available to common stockholders, 2009 150,000
Deduct: Cash dividends declared and paid in 2009 30,000
Retained earnings, balance, December 31, 2009 $ 620,000

Comparative Balance Sheets
For 2008 and 2009
Year‐End Year‐End
Assets 2008 2009
Current assets:
Cash $ 80,000 $ 135,000
Accounts receivable (net) 310,000 340,000
Inventory 400,000 405,000
Prepaid expenses 55,000 25,000
Total current assets 845,000 905,000
Investments (long‐term securities) 85,000 50,000
Plant and equipment 2,000,000 2,450,000
Less: Accumulated depreciation 1,000,000 1,150,000
Net plant and equipment 1,000,000 1,300,000
Total assets $ 1,930,000 $ 2,255,000
Current liabilities:
Accounts payable $ 275,000 $ 475,000
Notes payable 400,000 400,000
Accrued expenses 65,000 60,000
Total current liabilities 740,000 935,000
Long‐term liabilities:
Bonds payable, 2009 70,000 80,000
Total liabilities 810,000 1,015,000
Stockholders’ equity:
Preferred stock, $100 par value 90,000 90,000
Common stock, $1 par value 120,000 120,000
Capital paid in excess of par 410,000 410,000
Retained earnings 500,000 620,000
Total stockholders’ equity 1,120,000 1,240,000
Total liabilities and stockholders’ equity $ 1,930,000 $ 2,255,000

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