Pro Forma Financial Statements

FORECASTING PRO FORMA FINANCIAL STATEMENTS

Prepare a pro forma income statement and balance sheet for Webb Enterprises, found in Problem 6-7, where revenues are expected to grow by 20% in 2016. Make the following assumptions in making your forecast of the firm’s balance sheet for 2016:

■ The income statement expenses are a constant percent of revenues except for interest, which remains equal in dollar amount to the 2015 level, and taxes, which equal 40% of earnings before taxes.

■ The cash and marketable securities balance remains equal to $500, and the remaining current asset accounts and fixed assets increase in proportion to revenues for 2015.

■ Net property, plant, and equipment increase in proportion to the increase in revenues and depreciation expenses for 2016 is $2000.

■ Accounts payable increases in proportion to firm revenues.

■ Owners’ equity increases by the amount of firm net income for 2016 (no cash dividends are paid).

■ Long-term debt remains unchanged, and short-term debt changes in an amount that balances the balance sheet.

6-13 FORECASTING FIRM FCF Using your pro forma financial statements from Problem 6-12, estimate the firm’s FCF for 2016.

Pro forma financial statements

See attached file.

Using this information, construct a pro forma income statement and balance sheet for the firm using the percent-of-sales method. What amount of new financing will be needed? If the firm uses ONLY short-term funds for this financing, how will working capital and the D/E ratio be affected? What if the firm uses only long-term debt or equity for this new funding–what happens to working capital and D/E ratio? What mix of new funding would keep the firm’s working capital and D/E ratio the same?

Pro forma Financial Statements

I need to complete a set of proforma financial statements using the attached mini case study. I also need to answer a few questions about the financial statement. I will attach the case study in adobe. It begins on pg 99 and is about a company Home Safety Inc. the finacial statements need to be done in Microsoft excel. I will also provide some check figures that my teacher provided below.

Mini-Case Study: Home Safety, Inc

2003 est
Net Income $8,230
Total Assets $98,988
Total Liabilities $48,910
Cashflow from Operating Activities ($17,323)
Cashflow from Investing Activities ($15,998)
Cashflow from Financing Activities $33,736

These are the four questions that need to be answered.

1) How much revenue growth is needed to achieve the desired profitability?

2) Based on your review of the pro forma financial statements, what general observations and recommendations can you make?

3) Do you believe that these pro forma statements will meet the company’s overall goals and objectives? Why or why not?

4) What other assumptions and considerations are necessary for this plan to work?

Pro forma financial statements

Below are the pro forma financial statements for 2010 of your company. The owners of the company have grown sales by having a very generous credit policy. The yearend A/R balance will be $2,500,000 which is about 90 days of sales. There will also be a Notes Payable bank loan of $1,900,000 outstanding at the end of the year. The company’s banker said it would be very difficult for the bank to lend the company that much, because the company is acting like a bank by financing customers’ purchases.

The owner would like to see how changing the credit policy would affect the need for a loan. They would like to lower the year end A/R balance to 45 days of sales. The owners realize this will cause the sales to fall. They predict the sales will fall 4% to $9.6 million for the year. GA&S, fixed assets, long term debt, common stock and depreciation will not change. Inventory, cost of goods sold, and A/P will remain the same percent of sales under either plan. The tax rate is 30%. The minimum cash balance is $250,000.

Pro form income statement for 2010 (in thousands)
Sales 10,000
COGS 6,400
GM 3,600
GA&S 1,600
Dep 400
Int 250
Taxable income 1,350
Tax 405
Net income 945

Pro forma balance sheet as of Dec 31, 2010
Cash 250
A/R 2,500
Inv 1,600
TCA 4,350
FA 12,000
Acc. Dep 4,800
NFA 7,200
TA 11,550

A/P 200
N/P 1,900
TCL 2,100

LTD 1,225
CS 1,000
RE 7,225
TL&E 11,550

Create a new pro forma for 2010 using the new credit policy with the lower sales estimate.

Pro-forma financial statements

Hello,

I need help with a pro forma problem. Attached you will find the income statement, balance sheet and problem. Please let me know if you need additional information.

Thank you so much for your help!

Data Item Value
Sales revenue 6,500,000
Min. cash balance 25,000
Inventory turnover (times) 7
Average collection period 50 days
Fixed-asset purchases 400,000
Total dividend payments (preferred and common) $20,000
Depreciation expense $185,000
Interest expense $97,000
Accounts payable increase 20%
Accruals and long-term debt unchanged
Notes payable, preferred and common stock unchanged

TO DO:
1. Use the historical and projected financial data provided to prepare a pro forma income statement for the year ended Dec. 31, 2007. (HINT: Use
the percent-of-sales method to estimate all values except depreciation expense and interest expense, which have been estimated by management
and included in the table)
2. Use the projected financial data along with relevant data from the pro forma income statement prepared in part a to prepare the pro forma balance
sheet at Dec. 31, 2007. (HINT: Use the judmental approach)
3. Will Martin Manufacturing Company need to obtain external financing to fund the proposed equipment modernization program? Explain.

Pro-forma financial statements

Why are pro-forma financial statements important to the financial planning process?

Pro-forma Financial Statements

Search on the internet for pro-forma financial statements of any large public company from last year (e.g. Coca-cola, Home Depot, etc). Compare these to the results by looking at the actual financial statements. Many times, the companies will list how they performed compared to their estimates. Write a paragraph about the expectations the company had along with how they actually did. In addition, elaborate on why you think they did or did not meet their expectations.

Pro-forma financial statements

You have just completed estimating your organization’s pro-forma financial statements for the coming year. The amount of external funding indicated is hopelessly large, in your opinion. What types of changes can you consider that will reduce this value?

Pro forma financial statements

If you constructed a set of pro forma financial statements for 2005 and found that projected Total Assets exceeded projected Total Liabilities and Equity by $11,250, you would know that:

a. your forecasting method is inaccurate

b. your forecasting assumptions or calculations must be in error, because projected Assets and projected Liabilities and Equity must always balance

c. you must arrange for $11,250 in additional financing

d. your firm will have $11,250 of excess funds available in 2005

Pro Forma Financial Statements

INSTRUCTIONS: Using the base pro forma financial statements, refine and realistically quantify the following recommendations and prepare a set of modified pro forma statements implementing these recommendations in order to meet the goal of total debt/equity of 60% or less. Justify revised recommendations and the resulting impact on the organization’s financial plan.

Recommendations:
1. Reduce dividend payout to shareholder
2. Take additional equity
3. If recommendation #1 and/or #2 is not possible, the forecasted sales growth will need to be reduced

PLEASE HELP! I am completely confused on how this is done. Attached are the original base pro forma financial statements.

Pro forma financial statements

15-6 Review the following 2009 balance sheet and income statement for T. F. Baker Cosmetics, Inc. The numerical values are in thousands of dollars.

T.F. Baker Cosmetics, Inc.

Balance Sheet

Cash $ 5,000 Accounts payable $10,000
Accounts receivable 12,500 Short-term bank loan 15,000
Inventory 10,000 Long-term debt 10,000
Current assets $27,000 Common stock 15,000
Gross fixed assets $65,000 Retained earnings 12,500
Less: accum. depr. 30,000 Total liabilities and equity $62,500
Net fixed assets $35,000
Total assets $62,500

T.F. Baker Cosmetics, Inc.

Income Statement

Sales $150,000
Less: Cost of goods sold 120,000
Gross profit $ 30,000
Less: Operating expenses 15,000
Less: Depreciation 5,000
Less: Interest 2,000
Pretax profit $ 8,000
Less: Taxes (35%) 2,800
Net Income $ 5,200

At a recent board meeting, the firm set the following objectives for 2010:

1. The firm would increase liquidity. For competitive reasons, accounts receivable and inventory balances were expected to continue their historical relationships with sales and cost of goods sold, respectively, but the Board felt that the company should double its cash holdings.

2. The firm would accelerate payments to suppliers. This would have two effects. First, by paying more rapidly, the firm would be able to take advantage of early payment discounts, which would increase its gross margin from 20 percent to 22 percent. Second, by paying earlier, the firmâ??s accounts payable balance, which historically averaged about one twelfth of cost of goods sold, would decline to 4 percent of cost of goods sold.

3. The firm would expand its warehouse, which would require an investment in fixed assets of $10 million. This would increase projected depreciation expense from $5 million in 2009 to $7 million in 2010.

4. The firm would issue no new common stock during the year, and it would initiate a dividend payments in 2010 would total $1.2 million.

5. Operating expenses would remain at 10 percent of sales.

6. The firm did not expect to retire any long-term debt, and it was willing to borrow up to the limit of its current credit line with the bank, $20 million. The interest rate on its outstanding debts would average 8 percent.

7. The firm set a sales target for 2010 of $200 million.

Develop a set of pro forma financial statements to determine whether or not T.F. Baker Cosmetics can achieve all these goals simultaneously.

This is I have for the homework problem. Can anyone assist me?

Pro forma financial statements

How do financial executives use pro forma financial statements? How do organizational goals influence the preparation and evaluation of pro forma financial statements?

Pro-forma financial statements

Which one of the following statements regarding pro-forma financial statements is false?

a. Pro-forma financial statements include an income statement, a balance sheet, and a statement
of cash flows.
b. The pro-forma financial statements complete the master budget for a company.
c. Pro-forma financial statements help companies make decisions regarding dividends and
management bonus opportunities for the coming year.
d. Most companies do not create pro-forma financial statements because of the many assumptions
required.