Bab Ltd

The most recent financial statements for Bab Ltd are as follows:

Bab Ltd

Income statement for the year ended

R
Sales 3 000 000
Costs (1 950 000)
Profit before tax 1 050 000
Tax expense (304 500)
Net profit 745 500

Statement of financial position

R
Equity 10 000 000
Long-term debt 4 000 000
Capital employed 14 000 000

Fixed assets 9 000 000

Net working capital 5 000 000
Net assets 14 000 000

Assume that in the above question information stays the same, except: the company is
currently operating at only 95% of its fixed asset capacity. Also assume that sales and
working capital are proportional to fixed assets.

REQUIRED:-

5.1 Calculate the full sales value capacity. (1)

5.2 By what percentage the current sales can increase to full capacity? (2)
5.3 Calculate fixed asset as a percentage of full capacity sales (2)
5.4 Prepare a pro-forma income statement. (4)
5.5 How much is the external financing needed? (3)
5.6 Revise your equity and liabilities section of the balance sheet after calculating the
required external finance. (3)