chap16 - Financial Planning and Forecasting Forecast Sales...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Financial Planning and Forecasting Forecast Sales  Project the Assets Needed to Support Sales  Project Internally Generated Funds  Project Outside Funds Needed  Decide How to Raise Funds  See Effects of Plan on Ratios 2006 Sales 10,000,000  2006 Total Assets 8,000,000  Want to project 2007 financial statements based on a 30% increase in sales.  Projected 2007 Sales 10,000,000(1.30) = $13,000,000 Assets 2006 Liabilities and Equity 2006 Cash 500 $ Accounts payable 1,000 $ Receivables 2,000 $ Accruals 500 $ Inventory 1,500 $ Notes payable 900 $ Total Current Assets 4,000 $ Total Current Liabilities 2,400 $ Long-term debt 1,600 $ Net fixed assets 4,000 $ Common stock 1,700 $ Retained earnings 2,300 $ Total Assets 8,000 $ Total Liabilities and Equity 8,000 $ Income Statement 2006 Sales 10000 Operating Expenses(72.5%) 7250 Operating Income 2750 Interest Expense 250 Income before taxes 2500 Taxes (40%) 1000 Net Income 1500 Dividends (30%) 450 Addition to Retained Earnings 1050 Known as percentage of sales approach.  Zippy is operating at full capacity in 2006.  Each type of asset grows proportionally with sales.  Accounts payable and accruals grow proportionally with sales.  2006 profit margin (15%) and payout (30%) will be maintained.  Sales are expected to increase by $3 million. (% ∆ S = 30%) Income Statement 2006 times = 2007 Proj Sales 10000 1.3 13000 Operating Expenses(72.5%) 7250 1.3 9425 Operating Income 2750 3575 Interest Expense 250 1.3 325 Income before taxes 2500 1.3 3250 Taxes (40%) 1000 1.3 1300 Net Income 1500 1.3 1950 Dividends (30%) 450 585 Addition to Retained Earnings 1050 1365 Assets 2006 times = 2007 Proj Cash 500 1.3 650 Receivables 2000 1.3 2600 Inventory 1500 1.3 1950 Total Current Assets 4000 5200 Net fixed assets 4000 1.3 5200 Total Assets 8000 10400 Liabilities and Equity...
View Full Document

This note was uploaded on 02/27/2009 for the course FIN 221 taught by Professor Dyer during the Fall '08 term at University of Illinois at Urbana–Champaign.

Page1 / 25

chap16 - Financial Planning and Forecasting Forecast Sales...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online