The FINC 5000 Associates Corporation (FAC) has begun selling a new product and t

Question

The FINC 5000 Associates Corporation (FAC) has begun selling a new product and they want you to help them with next year’s pro forma financial statements. Using the worksheet below, complete the company’s forecast. Assumptions: To begin with, FAC is sure sales will grow 20% next year. Assume that is true. Then assume that COGS, Current Assets, and Current Liabilities all vary directly with Sales (that means if sales grows a certain percentage, then the account in question will grow by that same percentage). Assume that fixed expenses will remain unchanged and that $1500 worth of new Fixed Assets will be obtained next year. Lastly, the current dividend policy will be continued next year.

This Year Next Year Estimate Sales $10,000 COGS 4,000 Gross Profit 6,000 Fixed Expenses 3,000 BeforeTax Profit 3,000 Tax @ 33.3333% 1,000 Net Profit $2,000 Dividends $0 0 Current Assets    $25,000 Net Fixed Assets 15,000 Total Assets $40,000 Current Liabilities        $17,000 Longterm debt 3,000 Common Stock 7,000 Retained Earnings 13,000 Total Liabs & Eq         $40,000          (AFN) =

Explanation / Answer

This Year Next Year Estimate Sales 10000 =*1.2 12000 COGS 4,000 =*1.2 4800 Gross Profit 6,000 =*1.2 7200 Fixed Expenses 3,000 3,000 3000 BeforeTax Profit 3,000 4200 Tax @ 33.3333% 1,000 1399.9999 Net Profit 2000 2800.0001 Dividends $0 0 Current Assets    25000 =*1.2 30000 Net Fixed Assets 15,000 +1500 16500 Total Assets 40000 46500 Current Liabilities        17000 =*1.2 20400 Longterm debt 3,000 3000 Common Stock 7,000 7000 Retained Earnings 13,000 +2800 15800 Total Liabs & Eq         40000 46200          (AFN) = 300

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