Question 1 Given the financial statements below for Firefly Enterprises, what is the external financing need for a pro forma increase in sales of 16%? Enter your answer as the nearest whole (e.g., 123), but do not include the $ sign. Firefly Enterprises Income Statement ($ Million) 2011 Sales 740 Cost of Goods Sold 452 Selling, General, & Admin Exp. 124 Depreciation 40 Earnings Before Interest & Taxes 124 Interest Expense 24 Taxable Income 100 Taxes at 40% 40 Net Income 60 Dividends 18 Addition to Retained Earnings 42 Balance Sheets as of 12-31 Assets 2010 2011 Cash 20 20 Account Receivable 102 110 Inventory 76 80 Total Current Assets 198 210 Net Fixed Assets 352 410 Total Assets 550 620 Liabilities and Owners Equity 2010 2011 Accounts Payable 62 70 Notes Payable 0 0 Total Current Liabilities 62 70 Long-Term Debt 280 300 Common Stock 34 34 Retained Earnings 174 216 Total Liab. and Owners Equity 550 620 Firefly Enterprises Income Statement ($ Million) 2011 Sales 740 Cost of Goods Sold 452 Selling, General, & Admin Exp. 124 Depreciation 40 Earnings Before Interest & Taxes 124 Interest Expense 24 Taxable Income 100 Taxes at 40% 40 Net Income 60 Dividends 18 Addition to Retained Earnings 42 Balance Sheets as of 12-31 Assets 2010 2011 Cash 20 20 Account Receivable 102 110 Inventory 76 80 Total Current Assets 198 210 Net Fixed Assets 352 410 Total Assets 550 620 Liabilities and Owners Equity 2010 2011 Accounts Payable 62 70 Notes Payable 0 0 Total Current Liabilities 62 70 Long-Term Debt 280 300 Common Stock 34 34 Retained Earnings 174 216 Total Liab. and Owners Equity 550 620 Solution Sales 858.40 Cost of goods sold 524.32 Selling, General, & Admin Exp. 143.84 Depreciation 40 EBIT 294.08 Interest expense 24 Taxable income 270.08 Taxes at 40% 108.032 Net income 162.048 Dividends 18 Addition to retained earnings 144.048 External finance required = total assets – liabilities- owners equity Assets Cash 23.2 Account receivable 118.32 Inventory 88.16 Total current assets 229.68 Net fixed assets 352 Total assets 581.68 Liabilities and owners equity Account payable 71.92 Notes payable 0 Total current liabilities 71.92 Long term debt 280 Common stock 34 Retained earnings 144.048 External finance required =581.68 – 529.968 =51.712 Assumption Sales 858.40 Cost of goods sold 524.32 Selling, General, & Admin Exp. 143.84 Depreciation 40 EBIT 294.08 Interest expense 24 Taxable income 270.08 Taxes at 40% 108.032 Net income 162.048 Dividends 18 Addition to retained earnings 144.048 External finance required = total assets – liabilities- owners equity Assets Cash 23.2 Account receivable 118.32 Inventory 88.16 Total current assets 229.68 Net fixed assets 352 Total assets 581.68 Liabilities and owners equity Account payable 71.92 Notes payable 0 Total current liabilities 71.92 Long term debt 280 Common stock 34 Retained earnings 144.048 External finance required =581.68 – 529.968 =51.712.

1. Question 1
Given the financial statements below for Firefly Enterprises, what is the external financing need
for a pro forma increase in sales of 16%? Enter your answer as the nearest whole (e.g., 123), but
do not include the $ sign.
Firefly Enterprises
Income Statement ($ Million)
2011
Sales
740
Cost of Goods Sold
452
Selling, General, & Admin Exp.
124
Depreciation
40
Earnings Before Interest & Taxes
124
Interest Expense
24
Taxable Income
100
Taxes at 40%
40
Net Income
60
Dividends
18
Addition to Retained Earnings
42
Balance Sheets as of 12-31
Assets
2010
2011
Cash
20

2. 20
Account Receivable
102
110
Inventory
76
80
Total Current Assets
198
210
Net Fixed Assets
352
410
Total Assets
550
620
Liabilities and Owners Equity
2010
2011
Accounts Payable
62
70
Notes Payable
0
0
Total Current Liabilities
62
70
Long-Term Debt
280
300
Common Stock
34
34
Retained Earnings
174

3. 216
Total Liab. and Owners Equity
550
620
Firefly Enterprises
Income Statement ($ Million)
2011
Sales
740
Cost of Goods Sold
452
Selling, General, & Admin Exp.
124
Depreciation
40
Earnings Before Interest & Taxes
124
Interest Expense
24
Taxable Income
100
Taxes at 40%
40
Net Income
60
Dividends
18
Addition to Retained Earnings
42
Balance Sheets as of 12-31
Assets
2010
2011
Cash
20
20

4. Account Receivable
102
110
Inventory
76
80
Total Current Assets
198
210
Net Fixed Assets
352
410
Total Assets
550
620
Liabilities and Owners Equity
2010
2011
Accounts Payable
62
70
Notes Payable
0
0
Total Current Liabilities
62
70
Long-Term Debt
280
300
Common Stock
34
34
Retained Earnings
174
216

5. Total Liab. and Owners Equity
550
620
Solution
Sales
858.40
Cost of goods sold
524.32
Selling, General, & Admin Exp.
143.84
Depreciation
40
EBIT
294.08
Interest expense
24
Taxable income
270.08
Taxes at 40%
108.032
Net income
162.048
Dividends
18
Addition to retained earnings
144.048
External finance required = total assets – liabilities- owners equity
Assets
Cash
23.2
Account receivable
118.32
Inventory
88.16

6. Total current assets
229.68
Net fixed assets
352
Total assets
581.68
Liabilities and owners equity
Account payable
71.92
Notes payable
0
Total current liabilities
71.92
Long term debt
280
Common stock
34
Retained earnings
144.048
External finance required
=581.68 – 529.968
=51.712
Assumption
Sales
858.40
Cost of goods sold
524.32
Selling, General, & Admin Exp.
143.84
Depreciation
40
EBIT
294.08
Interest expense
24
Taxable income

7. 270.08
Taxes at 40%
108.032
Net income
162.048
Dividends
18
Addition to retained earnings
144.048
External finance required = total assets – liabilities- owners equity
Assets
Cash
23.2
Account receivable
118.32
Inventory
88.16
Total current assets
229.68
Net fixed assets
352
Total assets
581.68
Liabilities and owners equity
Account payable
71.92
Notes payable
0
Total current liabilities
71.92
Long term debt
280
Common stock
34
Retained earnings
144.048

8. External finance required
=581.68 – 529.968
=51.712