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Building Financial Models-Dynastatics Corporation

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Building Financial Models. The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (that is, assets net of depreciation) by $200,000 per year for the next 5 years and forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 10 percent of net fixed assets at the start of the year. Fixed costs are expected to remain at $56,000 and variable costs at 80 percent of revenue. The company's
policy is to pay out two-thirds of net income as dividends and to maintain a book debt ratio of 25 percent of total capital.

a. Produce a set of financial statements for 2001. Assume that net working capital will equal 50 percent of fixed assets.

b. Now assume that the balancing item is debt, and that no equity is to be issued. Prepare a completed pro forma balance sheet for 2001. What is the projected debt ratio for 2001?

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Solution Summary

The solution prepares Financial Models for Dynastatics Corporation. A set of financial statements and pro forma balance sheet is prepared.

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