Kurumsal Finans ve Strateji Rehberi | Finance & Strategy Insights

Growth is both an opportunity and a challenge for any business. When you anticipate an increase in sales, it’s crucial to know how much money you will need to finance that growth and where you will get it. The answers to these questions lie in preparing a proforma balance sheet and calculating your financing gap.

This guide will walk you through the “Percent of Sales Method” to create a proforma balance sheet for the upcoming year and strategically plan how to cover the financial shortfall.

Scenario: West Inc.’s 2024 Plans

West Inc.’s closing balance sheet as of December 31, 2023, and its sales information are as follows:

Balance Sheet as of 31.12.2023:

ASSETS	TL	LIABILITIES & EQUITY	TL
Cash	30,000	Short-Term Debt	120,000
Accounts Receivable	150,000	Long-Term Debt	200,000
Inventory	90,000	Paid-in Capital	800,000
Total Current Assets	270,000	Retained Earnings	300,000
Fixed Assets	1,150,000
TOTAL ASSETS	1,420,000	TOTAL L&E	1,420,000

2023 Sales Revenue: 750,000 TL

Company’s 2024 Targets and Policies:

• 2024 Projected Sales Revenue: 1,000,000 TL (Significant growth is forecasted)
• Net Profit Margin: Expected to be 18% of sales.
• Dividend Policy: 35% of net profit will be distributed as dividends.
• Financial Targets:
  1. Acid-Test (Liquidity) Ratio: At least 1.10.
  2. Total Debt to Total Assets Ratio: No more than 35%.

Step 1: Preparing the Proforma Balance Sheet Using the Percent of Sales Method

First, we calculate the ratio of each balance sheet item to sales revenue from 2023. We assume these ratios will remain constant in 2024.

Ratio Calculations (2023 Base):

• Cash Ratio: 30,000 / 750,000 = 4%
• A/R Ratio: 150,000 / 750,000 = 20%
• Inventory Ratio: 90,000 / 750,000 = 12%
• Total Current Assets Ratio: (4%+20%+12%) = 36%
• Fixed Assets Ratio: 1,150,000 / 750,000 ≈ 153.33%
• Short-Term Debt Ratio: 120,000 / 750,000 = 16%

2024 Proforma Balance Sheet (Projected):

• PROJECTED SALES: 1,000,000 TL
• ASSETS:
  • Cash: 1,000,000 TL x 4% = 40,000 TL
  • Accounts Receivable: 1,000,000 TL x 20% = 200,000 TL
  • Inventory: 1,000,000 TL x 12% = 120,000 TL
  • Total Current Assets: 360,000 TL
  • Fixed Assets: 1,000,000 TL x 153.33% ≈ 1,533,333 TL
  • TOTAL ASSETS: 360,000 + 1,533,333 = 1,893,333 TL
• LIABILITIES & EQUITY:
  • Short-Term Debt: 1,000,000 TL x 16% = 160,000 TL
  • Long-Term Debt: (Assumed unchanged) = 200,000 TL
  • Paid-in Capital: (Assumed unchanged) = 800,000 TL
  • Retained Earnings:
    • 2024 Projected Net Profit: 1,000,000 TL x 18% = 180,000 TL
    • Dividends to be Distributed: 180,000 TL x 35% = 63,000 TL
    • Addition to Retained Earnings: 180,000 TL – 63,000 TL = 117,000 TL
    • Proforma R/E: 300,000 TL (old) + 117,000 TL (new) = 417,000 TL
  • CURRENT TOTAL L&E: 160,000 + 200,000 + 800,000 + 417,000 = 1,577,000 TL

Step 2: Calculating the Financing Need

If Total Assets are greater than Total Liabilities & Equity, the difference indicates a financing gap.

Financing Gap = Total Assets – Current Total Liabilities & Equity
Financing Gap = 1,893,333 TL – 1,577,000 TL = 316,333 TL

West Inc. needs 316,333 TL in additional financing to fund its projected growth for 2024.

Step 3: Determining How to Cover the Financing Need

The company should cover this gap strategically, adhering to its financial targets, not arbitrarily.

1. Meeting the Acid-Test (Liquidity) Ratio Condition:

Acid-Test Ratio = (Current Assets – Inventory) / Short-Term Liabilities

Target: This ratio ≥ 1.10.

In the proforma:

• (360,000 TL – 120,000 TL) = 240,000 TL
• Short-Term Debt: 160,000 TL

However, part of the financing gap can be covered by additional short-term debt (STD). Let’s assume we use an additional X TL of STD.

Formula:
1.10 = 240,000 / (160,000 + X)

Solving the equation:
1.10 * (160,000 + X) = 240,000
176,000 + 1.10X = 240,000
1.10X = 240,000 - 176,000
1.10X = 64,000
X ≈ 58,182 TL

Result: To meet the liquidity target, a maximum of 58,182 TL can be raised through additional short-term debt.

2. Meeting the Total Debt to Total Assets Ratio Condition:

Total Debt / Total Assets = (STD + LTD) / Total Assets

Target: This ratio ≤ 35%.

In the proforma:

• Short-Term Debt: 160,000 TL + 58,182 TL = 218,182 TL
• Long-Term Debt: 200,000 TL (current) + Y TL (additional LTD)
• Total Assets: 1,893,333 TL (this remains unchanged by the financing)

Formula:
(218,182 + 200,000 + Y) / 1,893,333 ≤ 0.35

Solving the equation:
(418,182 + Y) ≤ 0.35 * 1,893,333
418,182 + Y ≤ 662,666.55
Y ≤ 662,666.55 - 418,182
Y ≤ 244,484.55 TL

Amount to be covered by Long-Term Debt: Up to 244,485 TL.

3. Covering the Remainder with Equity:

Total Financing Gap: 316,333 TL

• Covered by Short-Term Debt: 58,182 TL
• Covered by Long-Term Debt: 244,485 TL
• Amount to be covered by Equity (Capital Increase):
  316,333 - 58,182 - 244,485 = 13,666 TL

Conclusion and Recommendations

West Inc.’s 1,000,000 TL sales target for 2024 creates a financing need of 316,333 TL. To adhere to its financial targets, the company should cover this need as follows:

1. 58,182 TL through short-term debt (e.g., bank loans),
2. 244,485 TL through long-term debt (e.g., bond issuance or long-term loans),
3. 13,666 TL through equity (a capital increase).

This structure will allow the company to maintain its liquidity (Acid-Test Ratio: 1.10) and keep its debt burden under control (Total Debt/Assets: 35%). This type of planning is one of the most critical steps a business can take for sustainable growth.