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Practice1INPUT DATAForecasted annual sales growth 10%COGS/SALES 55%SG&A/SALES 20%DEPRECIATION/Gross PPE 8%INTEREST RATE 10%TAX

Practice1

INPUT DATA
Forecasted annual sales growth10%
COGS/SALES55%
SG&A/SALES20%
DEPRECIATION/Gross PPE8%
INTEREST RATE10%
TAX RATE35%
CASH/SALESPlug
ACCOUNT RECEIVABLE/SALES35%
INVENTORY/SALES85%
ACCOUNTS PAYABLE/SALES14%
OTHER CURRENT LIAB/SALES25%
GROSS PPE70% of sales if Sales <=45000
27000+0.7(Sales-40000) if 45000< Sales <= 50000
38500+0.3(Sales-50000) if Sales > 50000
No change in dividend
No change in long-term debt and stock
SHORT-TERM BORROWINGNo change
200120022003200420052006
INCOME STATEMENT
Sales39,79243,77148,14852,96358,25964,085
Cost of goods sold(22,335)(24,074)(26,482)(29,130)(32,043)(35,247)
Selling, general, & admin. expenses(7,970)(8,754)(9,630)(10,593)(11,652)(12,817)
Depreciation(2,667)(2,292)(2,534)(2,884)(3,215)(3,348)
Operating income6,8208,6519,50310,35711,35012,673
Interest expense(3,200)(3,580)(3,580)(3,580)(3,580)(3,580)
Earnings before taxes3,6205,0705,9236,7777,7709,093
Income taxes(1,267)(1,775)(2,073)(2,372)(2,719)(3,183)
Net Earnings2,3533,2963,8504,4055,0505,910
Dividends1,5001,5001,5001,5001,5001,500
Retentions of Earnings8531,7962,3502,9053,5504,410
BALANCE SHEET
Assets
Cash1,540(817)(1,543)(6,340)(5,453)(4,161)
Accounts Receivable13,31615,32016,85218,53720,39122,430
Inventories34,71737,20640,92645,01949,52154,473
Total Current Assets49,57351,70856,23557,21664,45872,741
Gross Property Plant & Equipt.26,66730,64032,70439,38940,97842,726
Accumulated Depreciation(10,205)(12,497)(15,031)(17,915)(21,130)(24,478)
Net Property Plant & Equipt.16,46218,14217,67321,47419,84818,248
Total Assets66,03569,85073,90878,69084,30690,989
Liabilities and Stockholders’ Equity
Short Term Borrowings25,80225,80225,80225,80225,80225,802
Accounts Payable5,3286,1286,7417,4158,1568,972
Other Current Liabilities9,72310,94312,03713,24114,56516,021
Total Current Liabilities40,85342,87344,58046,45848,52350,795
Long Term Debt10,00010,00010,00010,00010,00010,000
Total Liabilities50,85352,87354,58056,45858,52360,795
Stock10,00010,00010,00010,00010,00010,000
Retained earnings5,1826,9789,32812,23315,78320,194
Stockholders’ Equity15,18216,97819,32822,23325,78330,194
Total Liabs. & Stkhldrs’ Eq.66,03569,85073,90878,69084,30690,989

Practice2

INPUT DATA
Forecasted annual sales growth10%You find that the Cash account balance drops below zero in some years in the first question.
COGS/SALES55%In this question, build the the pro forma assuming that if the cash balance should be at least 2000. If needed, borrow short-term debt to make up the shortfall.
SG&A/SALES20%
DEPRECIATION/Gross PPE8%
INTEREST RATE10%
TAX RATE35%
CASH/SALESPlug
ACCOUNT RECEIVABLE/SALES35%
INVENTORY/SALES85%
ACCOUNTS PAYABLE/SALES14%
OTHER CURRENT LIAB/SALES25%
GROSS PPE70% of sales if Sales <=45000
27000+0.7(Sales-40000) if 45000< Sales <= 50000
38500+0.3(Sales-50000) if Sales > 50000
No change in dividend
No change in long-term debt and stock
SHORT-TERM BORROWINGPlug
200120022003200420052006
INCOME STATEMENT
Sales39,79243,77148,14852,96358,25964,085
Cost of goods sold(22,335)(24,074)(26,482)(29,130)(32,043)(35,247)
Selling, general, & admin. expenses(7,970)(8,754)(9,630)(10,593)(11,652)(12,817)
Depreciation(2,667)(2,292)(2,534)(2,884)(3,215)(3,348)
Operating income6,8208,6519,50310,35711,35012,673
Interest expense(3,200)(3,726)(3,919)(4,227)(4,488)(4,488)
Earnings before taxes3,6204,9255,5856,1306,8638,186
Income taxes(1,267)(1,724)(1,955)(2,146)(2,402)(2,865)
Net Earnings2,3533,2013,6303,9854,4615,321
Dividends1,5001,5001,5001,5001,5001,500
Retentions of Earnings8531,7012,1302,4852,9613,821
BALANCE SHEET
Assets
Cash1,5402,0002,0002,0002,2962,998
Accounts Receivable13,31615,32016,85218,53720,39122,430
Inventories34,71737,20640,92645,01949,52154,473
Total Current Assets49,57354,52559,77865,55672,20879,901
Gross Property Plant & Equipt.26,66730,64032,70439,38940,97842,726
Accumulated Depreciation(10,205)(12,497)(15,031)(17,915)(21,130)(24,478)
Net Property Plant & Equipt.16,46218,14217,67321,47419,84818,248
Total Assets66,03572,66877,45187,03092,05698,149
Liabilities and Stockholders’ Equity
Short Term Borrowings25,80228,71429,66034,87734,87734,877
Accounts Payable5,3286,1286,7417,4158,1568,972
Other Current Liabilities9,72310,94312,03713,24114,56516,021
Total Current Liabilities40,85345,78548,43855,53257,59859,870
Long Term Debt10,00010,00010,00010,00010,00010,000
Total Liabilities50,85355,78558,43865,53267,59869,870
Stock10,00010,00010,00010,00010,00010,000
Retained earnings5,1826,8839,01311,49814,45818,279
Stockholders’ Equity15,18216,88319,01321,49824,45828,279
Total Liabs. & Stkhldrs’ Eq.66,03572,66877,45187,03092,05698,149

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