Problem:
I need assistance in describing results of the pro forma statement and making recommendations to management based on these results. Need this in a summarized form. No need for spreadsheet work....Just a couple of paragraphs would be okay.
Some assumptions used in compliling the attached pro-forma are.
-Assets as a % of sales in FYE 04 was 88%. Liabilities available for spontaneous funding as a % of sales - 19.9%.
-In the past, dividends have been paid and the percentage (based on net income) was 37.6%, the same level of dividends was assumed for FYE05 results.
- An increase in sales of 20% resulted in revenue for FYE 05 of $24,023.
-Sales has increased, therefore, the level of retained earnings and the support provided by the spontaneous liabilities analyzed, the funding shortfall is $475.
Added underlying assumption document....
When an organization forecasts financial information it is using pro forma financial statements. The first financial statement is the income statement that is developed, then the cash budget and finally the pro forma balance sheet is developed. When developing these pro forma financial statements there are certain assumptions used. There is an assumption, or plan for increased sales and then inventory needs to be determined based on this projection. When the pro forma income statement was developed for ACME has assumed that the cost of goods sold, expenses, interest, taxes, and dividends remained at the same percentage level. For this scenario it is assumed that at times of increase sales that the rest of the expenses do increase at the same rate. On the income statement, not only did sales rise by twenty percent but all of the expenses were raised twenty percent as well. For this scenario it is assumed that these percentage levels will remain the same with the understanding that the pro forma financial information can be modified as it is analyzed over time. The balance sheet can now be developed off of the pro forma income statement, prior balance sheet and the cash budget, which is not used in this scenario.
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Type |
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Type |
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Type |
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| |
Audit |
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Audit |
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Pro-Forma |
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Date |
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Date |
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Date |
|
| Acme Corp |
12-31-03 |
|
31-12-04 |
|
31-12-05 |
|
| |
# Months |
|
# Months |
|
# Months |
|
| |
12 |
|
12 |
|
12 |
|
| BALANCE SHEET |
|
|
$20,011 |
% of Sales |
$24,013 |
% of Sales |
| ASSETS |
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
| Cash |
$1,836 |
10.4% |
$2,757 |
13.8% |
$3,308 |
13.8% |
| Accounts Receivable |
$2,714 |
15.4% |
$2,792 |
14.0% |
$3,350 |
14.0% |
| Inventory |
$1,816 |
10.3% |
$1,897 |
9.5% |
$2,276 |
9.5% |
| Other Current Assets |
$1,354 |
7.7% |
$1,274 |
6.4% |
$1,529 |
6.4% |
| Total Current Assets |
$7,720 |
43.9% |
$8,720 |
43.6% |
$10,464 |
43.6% |
| Gross Fixed Assets (at cost): |
|
|
|
|
|
|
| Machinery and Equipment |
$5,609 |
31.9% |
$5,711 |
28.5% |
$6,853 |
28.5% |
| Leasehold Improvements |
$0 |
0.0% |
$0 |
0.0% |
$0 |
0.0% |
| Total Gross Fixed Assets |
$5,609 |
31.9% |
$5,711 |
28.5% |
$6,853 |
28.5% |
| Less: Accumulated Depreciation |
$0 |
0.0% |
$0 |
0.0% |
$0 |
0.0% |
| Net Fixed Assets |
$5,609 |
31.9% |
$5,711 |
28.5% |
$6,853 |
28.5% |
| Prepaid Pension & Post Retirement Benefits |
$633 |
3.6% |
$2,591 |
12.9% |
$3,109 |
12.9% |
| Investments |
$218 |
1.2% |
$227 |
1.1% |
$272 |
1.1% |
| Other Assets |
$727 |
4.1% |
$527 |
2.6% |
$632 |
2.6% |
| Due from Owner |
$0 |
0.0% |
$0 |
0.0% |
$0 |
0.0% |
| Intangible Assets |
$274 |
1.6% |
$277 |
0.0% |
$277 |
0.0% |
| Goodwill |
$2,419 |
13.7% |
$2,655 |
0.0% |
$2,655 |
0.0% |
| Total Other Assets Non-Current |
$4,271 |
24.3% |
$6,277 |
16.7% |
$6,946 |
16.7% |
| Total Assets |
$17,600 |
100.0% |
$20,708 |
88.8% |
$24,263 |
88.8% |
| LIABILITIES |
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
| Short-Term Borrowings & CPTD |
$1,202 |
12.4% |
$2,094 |
|
$2,094 |
0.0% |
| Accounts Payable |
$1,087 |
11.2% |
$1,168 |
5.8% |
$1,402 |
5.8% |
| Accrued Payroll |
$436 |
4.5% |
$487 |
2.4% |
$584 |
2.4% |
| Accrued Income Taxes |
$880 |
9.1% |
$867 |
4.3% |
$1,040 |
4.3% |
| Other Current Liabilities |
$1,477 |
15.2% |
$1,455 |
7.3% |
$1,746 |
7.3% |
| Unfunded Liability |
|
|
|
|
$475 |
|
| Total Current Liabilities |
$5,082 |
52.3% |
$6,071 |
19.9% |
$7,341 |
19.9% |
| Long Term Debt - 1 |
$1,735 |
17.9% |
$727 |
|
$727 |
|
| Other Non-Current Liabilities |
$2,898 |
29.8% |
$3,532 |
|
$3,532 |
|
| Total Liabilities |
$9,715 |
100.0% |
$10,330 |
|
$11,600 |
|
| Common Stock |
$9 |
|
$9 |
|
$9 |
|
| Paid-In-Capital |
$287 |
|
$287 |
|
$287 |
|
| Retained Earnings |
$14,010 |
|
$15,649 |
|
$17,933 |
|
| Treasury Stock |
($4,641) |
|
($5,503) |
|
($5,503) |
|
| Unearned Compensation |
($226) |
|
($196) |
|
($196) |
|
| Accumulated Other Income (Loss) |
($1,554) |
|
$132 |
|
$132 |
|
| Total Equity/Subordinated Debt |
$7,885 |
|
$10,378 |
|
$12,662 |
|
| Total Liabs. & Stockhldrs' Equity |
$17,600 |
|
$20,708 |
|
$24,263 |
|
| Reconciliation TA & TL/SE |
$0 |
|
$0 |
|
($0) |
|