At the most recent strategic planning meeting, the board of directors of your co
ID: 2392753 • Letter: A
Question
At the most recent strategic planning meeting, the board of directors of your company has voted to issue additional stock to raise capital for major expansions for the company in the next five years. The board is considering $5 billion. Take the 2017 financial statements and prepare a set of projected financial statements based on the given assumptions. The CEO requests that you prepare a written report (including the financial statements) for her.
A. Generate a projected income statement based on the given scenario.
B. Analyze the impact on the income statement based on the given scenario.
C. Generate a projected statement of retained earnings based on the given scenario.
D. Analyze the impact on the statement of retained earnings based on the given scenario.
E. Generate a projected balance sheet based on the given scenario.
F. Analyze the impact on the balance sheet based on the given scenario.
G. Generate a projected cash flow statement based on the given scenario.
H. Analyze the impact on the cash flow statement based on the given scenario
Income statements (value in 000's)
Period Ending
1/28/2017
1/30/2016
Total Revenue
$69,495,000
$73,785,000
Cost of Revenue
$48,872,000
$51,997,000
Gross Profit
$20,623,000
$21,788,000
Research and Development
$0
$0
Sales, General and Admin.
$13,356,000
$14,665,000
Non-Recurring Items
$0
$0
Other Operating Items
$2,298,000
$2,213,000
Operating Income
$4,969,000
$4,910,000
Additional income/expense items
$0
$620,000
Earnings Before Interest and Tax
$4,969,000
$5,530,000
Interest Expense
$1,004,000
$607,000
Earnings Before Tax
$3,965,000
$4,923,000
Income Tax
$1,296,000
$1,602,000
Minority Interest
$0
$0
Equity Earnings/Loss Unconsolidated Subsidiary
$0
$0
Net Income-Cont. Operations
$2,669,000
$3,321,000
Net Income
$2,737,000
$3,363,000
Net Income Applicable to Common Shareholders
$2,737,000
$3,363,000
Statement of retained earnings
2017
Retained earnings, 2016 8,188,000
plus net income 2,737,000
total =10,925,000
minus dividends (1,356,000)
retained earnings, 2017 9,569,000
Balance Sheet
Current Assets
Cash and Cash Equivalents
$2,512,000
$4,046,000
Short-Term Investments
$0
$0
Net Receivables
$0
$0
Inventory
$8,309,000
$8,601,000
Other Current Assets
$1,169,000
$1,483,000
Total Current Assets
$11,990,000
$14,130,000
Long-Term Assets
Long-Term Investments
$0
$0
Fixed Assets
$24,658,000
$25,217,000
Goodwill
$0
$0
Intangible Assets
$0
$0
Other Assets
$783,000
$915,000
Deferred Asset Charges
$0
$0
Total Assets
$37,431,000
$40,262,000
Current Liabilities
Accounts Payable
$10,989,000
$11,654,000
Short-Term Debt / Current Portion of Long-Term Debt
$1,718,000
$815,000
Other Current Liabilities
$1,000
$153,000
Total Current Liabilities
$12,708,000
$12,622,000
Long-Term Debt
$11,031,000
$11,945,000
Other Liabilities
$1,878,000
$1,915,000
Deferred Liability Charges
$861,000
$823,000
Misc. Stocks
$0
$0
Minority Interest
$0
$0
Total Liabilities
$26,478,000
$27,305,000
Stock-Holders Equity
Common Stocks
$46,000
$50,000
Capital Surplus
$5,661,000
$5,348,000
Retained Earnings
$5,884,000
$8,188,000
Treasury Stock
$0
$0
Other Equity
($638,000)
($629,000)
Total Equity
$10,953,000
$12,957,000
Total Liabilities & Equity
$37,431,000
$40,262,000
Cash Flow
Net Income
$2,737,000
$3,363,000
Cash Flow-Operating Activities
Depreciation
$2,298,000
$2,213,000
Net Income Adjustments
$508,000
($812,000)
Changes in Operating Activities
Accounts Receivable
$0
$0
Changes in Inventories
$293,000
($316,000)
Other Operating Activities
$36,000
$227,000
Liabilities
($543,000)
$579,000
Net Cash Flow-Operating
$5,436,000
$5,958,000
Cash flows-Investing Activities
Capital Expenditures
($1,547,000)
($1,438,000)
Investments
$28,000
$24,000
Other Investing Activities
$46,000
$1,922,000
Net Cash Flows-Investing
($1,473,000)
$508,000
Cash Flows-Financing Activities
Sale and Purchase of Stock
($3,485,000)
($3,183,000)
Net Borrowings
($664,000)
($85,000)
Other Financing Activities
$0
$0
Net Cash Flows-Financing
($5,497,000)
($4,630,000)
Effect of Exchange Rate
$0
$0
Net Cash Flow
($1,534,000)
$1,836,000
Period Ending
1/28/2017
1/30/2016
Total Revenue
$69,495,000
$73,785,000
Cost of Revenue
$48,872,000
$51,997,000
Gross Profit
$20,623,000
$21,788,000
Research and Development
$0
$0
Sales, General and Admin.
$13,356,000
$14,665,000
Non-Recurring Items
$0
$0
Other Operating Items
$2,298,000
$2,213,000
Operating Income
$4,969,000
$4,910,000
Additional income/expense items
$0
$620,000
Earnings Before Interest and Tax
$4,969,000
$5,530,000
Interest Expense
$1,004,000
$607,000
Earnings Before Tax
$3,965,000
$4,923,000
Income Tax
$1,296,000
$1,602,000
Minority Interest
$0
$0
Equity Earnings/Loss Unconsolidated Subsidiary
$0
$0
Net Income-Cont. Operations
$2,669,000
$3,321,000
Net Income
$2,737,000
$3,363,000
Net Income Applicable to Common Shareholders
$2,737,000
$3,363,000
Statement of retained earnings
2017
Retained earnings, 2016 8,188,000
plus net income 2,737,000
total =10,925,000
minus dividends (1,356,000)
retained earnings, 2017 9,569,000
Balance Sheet
Current Assets
Cash and Cash Equivalents
$2,512,000
$4,046,000
Short-Term Investments
$0
$0
Net Receivables
$0
$0
Inventory
$8,309,000
$8,601,000
Other Current Assets
$1,169,000
$1,483,000
Total Current Assets
$11,990,000
$14,130,000
Long-Term Assets
Long-Term Investments
$0
$0
Fixed Assets
$24,658,000
$25,217,000
Goodwill
$0
$0
Intangible Assets
$0
$0
Other Assets
$783,000
$915,000
Deferred Asset Charges
$0
$0
Total Assets
$37,431,000
$40,262,000
Current Liabilities
Accounts Payable
$10,989,000
$11,654,000
Short-Term Debt / Current Portion of Long-Term Debt
$1,718,000
$815,000
Other Current Liabilities
$1,000
$153,000
Total Current Liabilities
$12,708,000
$12,622,000
Long-Term Debt
$11,031,000
$11,945,000
Other Liabilities
$1,878,000
$1,915,000
Deferred Liability Charges
$861,000
$823,000
Misc. Stocks
$0
$0
Minority Interest
$0
$0
Total Liabilities
$26,478,000
$27,305,000
Stock-Holders Equity
Common Stocks
$46,000
$50,000
Capital Surplus
$5,661,000
$5,348,000
Retained Earnings
$5,884,000
$8,188,000
Treasury Stock
$0
$0
Other Equity
($638,000)
($629,000)
Total Equity
$10,953,000
$12,957,000
Total Liabilities & Equity
$37,431,000
$40,262,000
Cash Flow
Net Income
$2,737,000
$3,363,000
Cash Flow-Operating Activities
Depreciation
$2,298,000
$2,213,000
Net Income Adjustments
$508,000
($812,000)
Changes in Operating Activities
Accounts Receivable
$0
$0
Changes in Inventories
$293,000
($316,000)
Other Operating Activities
$36,000
$227,000
Liabilities
($543,000)
$579,000
Net Cash Flow-Operating
$5,436,000
$5,958,000
Cash flows-Investing Activities
Capital Expenditures
($1,547,000)
($1,438,000)
Investments
$28,000
$24,000
Other Investing Activities
$46,000
$1,922,000
Net Cash Flows-Investing
($1,473,000)
$508,000
Cash Flows-Financing Activities
Sale and Purchase of Stock
($3,485,000)
($3,183,000)
Net Borrowings
($664,000)
($85,000)
Other Financing Activities
$0
$0
Net Cash Flows-Financing
($5,497,000)
($4,630,000)
Effect of Exchange Rate
$0
$0
Net Cash Flow
($1,534,000)
$1,836,000
Explanation / Answer
B. IMPACT ON INCOME STATEMENT
The income has declined as compared to the previous year 2017.
A. PROJECTED INCOME STATEMENT Particulars Year ending Year ending Year ending projection Basis 30-01-2016 ($) 28-01-2017 ($) 28-01-2018 ($) ratio Total revenue 73785000 69495000 65454429 0.94 Cost of revenue 51997000 48872000 45818100 0.70 Cost margin Gross Profit 21788000 20623000 19636329 0.30 GP margin Sales, General & 14665000 13356000 12717006 0.65 as % of GP Admin Expenses Other operating item 2213000 2298000 2188056 0.11 as % of GP Operating Income 4910000 4969000 4731267 Additional Income 620000 Interest expense 607000 1004000 955965 0.20 as % of op inc Earnings before tax 4923000 3965000 3775302 Income Tax 1602000 1296000 1233995 0.33 as % of EBT Net Income 3321000 2669000 2541306Related Questions
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