Assignment
Chapter 4 mini-case - S&S Air long term financial planning
Note: data is based on the S&S Air financial statements
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S&S Air, INC.
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2009 Income Statement
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Sales
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$30,499,420
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Cost of goods sold
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$22,224,580
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Other expenses
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$3,867,500
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Depreciation
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$1,366,680
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EBIT
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$3,040,660
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Interest
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$478,240
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Taxable income
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$2,562,420
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Taxes (40%)
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$1,024,968
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Net income
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$1,537,452
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Dividends
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$560,000
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Add to retained earnings
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$977,452
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S&S Air, INC.
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2009 Balance Sheet
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Assets
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Liabilities and Equity
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Current assets
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Current liabilities
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Cash
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$441,000
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Accounts payable
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$889,000
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Accounts receivable
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$708,400
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Notes payable
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$2,030,000
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Inventory
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$1,037,120
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Total current liabilities
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$2,919,000
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Total current assets
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$2,186,520
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Long term debt
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$5,320,000
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Fixed assets
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Net plant and equipment
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$16,122,400
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Shareholder equity
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Common stock
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$350,000
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Retained earnings
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$9,719,920
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Total equity
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$10,069,920
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Total assets
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$18,308,920
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Total liabilities and equity
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$18,308,920
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- Calculate the internal growth rate (IGR) and sustainable growth rate (SGR) for S&S Air
- Calculate the external financing needed (EFN) assuming 12% growth rate and full capacity operation. Use Excel to create pro-forma financial reports.
- Assume that the company, currently operating at full capacity, cannot simply increase fixed assets by 12%. Instead, the firm must buy a new line of business at a cost of 5 million dollars. Calculate the external financing needed (EFN) and capacity utilization for next year. Use Excel to create pro-forma financial statements and clearly explain your thinking and calculations.