ACC 561 FinancialAnalysisModel2

ACC 561 FinancialAnalysisModel2 - FINANCIAL MODEL TO...

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Profit and Loss Year 2006 Variables for modelling Net Sales $10,000,000 Days of Sales 45 Cost of Sales $6,000,000 Days of Cost 60 Gross Profit $ $4,000,000 Gross Margin % 40% Selling Expenses $900,000 Payment Terms 30 Marketing Expenses $600,000 Research Expenses $700,000 Administration Expenses $1,200,000 Total Operating Expenses $3,400,000 Operating Profit $600,000 Other Income/(Expenses) $100,000 EBIT $700,000 YEAR 2005 Return on Sales 7.0% 7.0% Net Sales / Ebit Turnover Capital Employed 3.3 3.3 Net Sales / Capital Employed times times Return on Capital Employed 22.9% 22.9% EBIT / Capital Employed - or Return on Sales * Turnover Capital Employed © Controller-Academy FINANCIAL MODEL TO DEMONSTRATE CASH FLOW- AND PROFITABILITY IMPACT O CHANGES IN PAYMENT TE YEAR 2006
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Balance Sheet 12/31/2006 12/31/2005 Variance Cash $1,000,000 $1,000,000 $- Accounts Receivables $1,250,000 $1,250,000 $- Inventories $1,000,000 $1,000,000 $- Prepaid Insurance $5,000 $5,000 $- Total current Assets $3,255,000 $3,255,000 $- $- Trade Payables $500,000 $500,000 $- Other Payables $100,000 $100,000 $- Accruals Payroll $900,000 $900,000 $- Current Liabilities $1,500,000 $1,500,000 $- $- Net Working Capital $1,755,000 $1,755,000 $- $- Fixed Assets $1,200,000 $1,200,000 $- Other long term Assets $100,000 $100,000 $- $- Capital Employed $3,055,000 $3,055,000 $- Comments: The Model assumes that Gross Profit of $ 4,000,000 and EBIT of $ 700,000 remain unchanged. Increase/decrease in the Gross Margin % will affect Net Sales and Cost of Sales to compensate for the Gross Margin variance. As a result of these changes, Accounts Receivables, Inventories and Trade Payable Balances will also change. In addition, the Model allows to change the Days of Sales, the Days of Cos and the Trade Payable payment terms. The resulting increases/decreases in Capital Employed shown in the Varia column indicate the additional/(reduction) in Borrowings needed to finance the changed Capital Employed position. All these changes affect the Return on Sales, the Turnover of the
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ACC 561 FinancialAnalysisModel2 - FINANCIAL MODEL TO...

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