Chapter 1: The Business System - An Overview
Income Statement
Key Assumptions
Balance SheetCash Flow
50,000
The Business System
Volume (units)40,000
New
Fixed costs400,000,000
investment
Variable costs - % sales
80%
700,000,000
Depreciation - % fixed assets
0%
Depreciation
25%
effectDis-investment
Current liabilities - % costs
0%
0
Investment
0
Capital expenditures200,000,000
base
Dis-investment0
0
9%
Work cap. change
Investment change
Cap. Expenditures
Tax rate
40%
500,000,000700,000,000200,000,000
Dividend payout
60%
Debt/equity ratio - targeted
60%
Debt as % of capitalization
38%
PriceVolume
Income Statement
Period 1
50,000
Costs
40,000
Sales2,000,000,000
(fixed & variable)
Costs2,000,000,000
2,000,000,000
Depreciation0Operating profit (EBIT)0Interest11,812,500Profit before taxes-11,812,500Taxes-4,725,000
Operating profitInterest
Net income-7,087,500
Dividendsafter taxes(tax adjusted)
Dividends0
007,087,500
Retained earnings-7,087,500
Retainedearnings
Balance Sheet
Base PeriodPeriod 1
-7,087,500
Current assets0500,000,000Fixed assets0200,000,000
Shareholders'
Assets0700,000,000
equityLong-term debt
437,500,000262,500,000
Current liabilities00
Change in stockFunds surplusChange in debt
Long-term debt0262,500,000
444,587,500
(deficit)
262,500,000
Shareholders' equity0437,500,000
#DIV/0!Liabilities and equity0700,000,000
Funding potential
Working capital0500,000,000
#DIV/0!
Capitalization0700,000,000
Cash Flow Statement
Operating Activities:
Net income-7,087,500Depreciation0Change in working capital-500,000,000
Cash provided by operating activites-507,087,500
Investing Activities:
Capital expenditures-200,000,000Dis-investments0
Cash (used in) investing activities-200,000,000
Financing Activities:
Debt proceeds (repayments)262,500,000Dividends paid0Stock proceeds (repurchase)444,587,500
Cash from financing activites707,087,500Change in cash0
© Modernsoft Inc., 1999All rights reservedCapital expenditures###Dis-investments0Working capital###Income (cash basis)-7,087,500Debt262,500,000Stock444,587,500Dividends0
Operations
: Price (per unit)
Investment:
Current assets - % sales
Financing
: Interest rate
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