Question

The Towson Company has a simple balance sheet for the fiscal year ending 12/31/2012, in thousands:...

The Towson Company has a simple balance sheet for the fiscal year ending 12/31/2012, in thousands:

Cash $100                                          Accounts payable $600

Receivables 500                                 Short-term loan 100

Inventory 800                                    Current liabilities $700

Current assets $1,400                       Long-term debt 5,000

Net fixed assets 10,000                      Common equity 5,700

Total assets $11,400                          Total liabilities and equity $11,400

Sales were $15 million in 2012. Consider the following assumptions:

• Sales are expected to grow at an annual rate of 10 percent for both 2013 and 2014.

• Property, plant, and equipment are expected to remain the same as in 2012.

• Long-term debt is expected to remain the same as in 2012.

• Any new financing must be carried out by selling additional equity interests.

Construct Towson’s balance sheets for 2013 and 2014, completing the following:

As of

12/31/2012                  12/31/2013      12/31/2014

Cash                                                   $100

Receivables                                        500

Inventory                                           800

Current assets                                   $1,400

Net fixed assets                                  10,000

Total assets                                        $11,400

Accounts payable                              600

Short-term loan                                 100

Current liabilities                             $700

Long-term debt                                 5,000

Common equity                                 5,700

Total liabilities and equity               $11,400

Be sure to list any additional assumptions you made in your analysis.

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Answer #1
Towson’s balance sheets for 2013 and 2014,
31/12/2012 31/12/2013 31/12/2014
Assets
Cash $100.00 $110.00 $121.00
Receivables $500.00 $550.00 $605.00
Inventory $800.00 $880.00 $968.00
Current Assets $1,400.00 $1,540.00 $1,694.00
Net Fixed Assets $10,000.00 $10,000.00 $10,000.00
Total Assets $11,400.00 $11,540.00 $11,694.00
Liabilites and Equity
Accounts Payable $600.00 $660.00 $726.00
Short term loan $100.00 $110.00 $121.00
Current Liabilities $700.00 $770.00 $847.00
Long term debt $5,000.00 $5,000.00 $5,000.00
Common Equity $5,700.00 $5,770.00 $5,847.00
Total Liabilities and Equity $11,400.00 $11,540.00 $11,694.00
Note : It is assumed that Towson Company is not operating at 100% capacity.
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