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JHUstudent's avatar

Finance Project, Help!

Asked by JHUstudent (678 points ) February 28th, 2012

Hey everyone,

I’m doing a Capital Budgeting Project for my Finance class. The goal is to create a Pro Forma Income Statement and Balance sheet. It is for the next 5 years. I copied the Balance Sheet portion of it below. Can anyone tell me how to proceed to the next year(s) after? Any help would be awesome!

Assets
Non-Operating Cash and Cash Equivalents $12,400
Operating Cash $37,600
Accounts Receivable $175,000
Inventory $390,000
Total Current Assets $615,000
Plant & Equipment (at Cost) $560,000
Accumulated Depreciation ($150,000)
Net Plant and Equipment $410,000
Total Assets $1,025,000

Liabilities and Owners’ Equity
Accounts Payable $151,352
Notes Payable $227,624
Other Current Liabilities (Operating) $50,000
Total Current Liabilities $428,976
Long-Term Debt $250,000
Total Liabilities $678,976
Common Stock (100,000 shares outstanding)
Paid-In Capital $155,560
Retained Earnings $190,464
Total Owners’ Equity $346,024
Total Liabilities and Owners’ Equity $1,025,000

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6 Answers

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Adirondackwannabe's avatar

There’s no way to proceed without the income statement also. It would also help to know the industry. Without knowing that there’s no way to proceed. Depending on that, your balance sheet could be looking pretty weak.

wundayatta's avatar

You have to estimate income and expenses and changes thereto year by year. You’ll have to follow standard accounting rules to do this, I guess. Accounting rules don’t often make sense, at least to me.

Aqua's avatar

In my class we used the percent-of-sales method to make the Pro Forma Balance Sheet, where all spontaneous accounts (and sometimes PP&E) vary as a percentage of sales. Non-spontaneous accounts don’t vary, and you’ll have to calculate Retained Earnings one of the following ways:
• Old RE + Change in RE
• End RE = Beg RE + NI – Dividends
• Old RE + [Projected Sales x Net Margin x (1-Payout Ratio)]

After that, you’ll have enough information to calculate the Discretionary Financing Needed (DFN).

You’ll need more information that what you provided here to solve everything. Off the top of my head, I’m not sure about the pro forma income statement. I’d suggest talking to a friend in class, going to see the TA, or talking to the professor. That’s the best way to get the help you need.

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