Carson Enterprises Balance Sheet Computation of EFN

Carson Enterprises Balance Sheet Computation of EFN -...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
I. Predicting External Financing Needs (EFN) by Using the Percentage of Sales Method: Method 1: Balance Sheet Approach EXAMPLE:    Carson Enterprises is in the midst of its annual planning  exercise.  The following information should be used to plan next year’s  finances.  Sales are currently $18 million with projected sales of $25  million for next year.  The company has a 5% profit margin. It’s current  assets equal $7 million, while its fixed assets are $6 million.  The best  estimate for next year is that current and fixed assets will equal the  current proportion of Sales.  Also, spontaneous liabilities will equal the  current proportion of Sales.  At the present time, the firm has accounts 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: payable of $1.5 million, long-term debt of $2 million and common equity totaling $9.5 million (including $4 million in retained earnings). Finally, Carson Enterprises plans to pay out 60% of its next years earnings as cash dividends. W hat will Carson Enterprises external financing needs (EFN) be in the projected year? Current Year % of sales Projected Sales Net income Assets Current Assets Fixed Assets Total Assets Liabilities Accounts Payable Long Term Debt Total Liabilities Owners Equity Common Stock Retained Earnings Total Owners Equity Liabilities + Owners Equity EFN...
View Full Document

Page1 / 2

Carson Enterprises Balance Sheet Computation of EFN -...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online