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    External funds needed

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    Ma & Pa Kettle's Chili Company have started up a business selling their new chili recipe and they want you to help them with next year's sales forecast. Using the worksheet below, complete Ma & Pa's financial forecast and answer the questions which follow.

    To begin with, Ma & Pa are sure sales will grow 50% next year. Assume that is true. Then assume that COGS, Current Assets, and Current Liabilities all vary directly with Sales. Assume that fixed expenses will remain unchanged and that $1,000 worth of new Fixed Assets will be obtained next year. Lastly, the current dividend policy will be continued next year.

    Ma & Pa Kettle Chili Company, Inc.
    Financial Status and Forecast for 2009

    2008 Est for 2009

    Sales $10,000 ________
    COGS 4,000 ________
    Gross Profit 6,000 ________
    Fixed Expenses 3,000 ________
    Before Tax Profit 3,000 ________
    Tax @ 33.3333% 1,000 ________
    Net Profit $2,000 ________

    Dividends $0 ________

    Current Assets $25,000 ________
    Net Fixed Assets 15,000 ________
    Total Assets $40,000 ________

    Current Liabilities $17,000 ________
    Long term debt 3,000 ________
    Common Stock 7,000 ________
    Retained Earnings 13,000 ________
    Total Liabs & Eq $40,000 ________

    Will Ma & Pa be able to get by without any External Funding Required in 2009? .

    If not, how much will they need? $________.

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    Solution Preview

    *Please see the attached file for the calculations*.

    Will Ma & Pa ...

    Solution Summary

    The solution explains how to prepare proforma statements and calculate the external funds needed