Pro Forma Financial Statements and Free Cash Flow Computation
Not what you're looking for?
FORECASTING PRO FORMA FINANCIAL STATEMENTS
Prepare a pro forma income statement and balance sheet for Webb Enterprises, found in Problem 6-7, where revenues are expected to grow by 20% in 2016. Make the following assumptions in making your forecast of the firm's balance sheet for 2016:
■ The income statement expenses are a constant percent of revenues except for interest, which remains equal in dollar amount to the 2015 level, and taxes, which equal 40% of earnings before taxes.
■ The cash and marketable securities balance remains equal to $500, and the remaining current asset accounts and fixed assets increase in proportion to revenues for 2015.
■ Net property, plant, and equipment increase in proportion to the increase in revenues and depreciation expenses for 2016 is $2000.
■ Accounts payable increases in proportion to firm revenues.
■ Owners' equity increases by the amount of firm net income for 2016 (no cash dividends are paid).
■ Long-term debt remains unchanged, and short-term debt changes in an amount that balances the balance sheet.
6-13 FORECASTING FIRM FCF Using your pro forma financial statements from Problem 6-12, estimate the firm's FCF for 2016.
Purchase this Solution
Solution Summary
This solution illustrates how to create a pro forma income statement and balance sheet using the prior year's financial statements and estimated changes in each account. It also illustrates how to compute free cash flows using the pro forma financial statements.
Purchase this Solution
Free BrainMass Quizzes
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Lean your Process
This quiz will help you understand the basic concepts of Lean.