global corp. expects sales to grow by 6% next year. Using the percent of sales m

Question

global corp. expects sales to grow by 6% next year. Using the percent of sales method and the data provided above, forecast:

a. costs except depreciation

b. depreciation

c. net income

d. cash

e. accounts recievable

f. inventory

g. proerty, plant, and equipment

h. accounts payable

(note: interest expense will not change with a change in sales)

Income Statement Net Sales 185.8 Costs Except Depreciation -174.8 EBITDA 11 Depreciation and Amortization -1.2 EBIT 9.8 Interest Income (expense) -7.7 Pretax Income 2.1 Taxes (26%) -0.5 Net Income 1.6

Explanation / Answer

Answer:

a. costs except depreciation = -185.29 (Refer note 1 for workings)

b. depreciation = -1.27 (Refer note 1 for workings)

c. net income = 1.99 (Refer note 1 for workings)

d. cash = 24.70 (Refer note 2 for workings)

e. accounts recievable = 20.03 (Refer note 2 for workings)

f. inventory = 16.22 (Refer note 2 for workings)

g. proerty, plant, and equipment = 119.46 (Refer note 2 for workings)

h. accounts payable = 36.89 (Refer note 2 for workings)

Workings:

Note 1:

Note 2:

Income Statement Amount A) B = % of sales(Each row value of A/Net sales)*100 Changes in sales C=A*B Net Sales(1) 185.8 100% 196.95 Costs Except Depreciation(2) -174.8 -94.08% -185.29 EBITDA 3=(1+2) 11 5.92% 11.66 Depreciation and Amortization (4) -1.2 -0.65% -1.27 EBIT 5= 3+4 9.8 5.27% 10.39 Interest Income (expense) --(6) -7.7 - -7.70 Pretax Income 7= 5+6 2.1 2.69 Taxes (26%)(8) = 7*26% -0.5 0.70 Net Income (7-8) 1.6 1.99

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