Anda di halaman 1dari 14

Tire City Case

Pro forma income statements and balance sheets for 1996

& 1997
1/2 page
project the need for financing for the warehouse project
determined by the projected cash flows;
assess the financial health of Tire City before and after
the project is completed
General methodology for producing a forecast average
% of sales approach
Sales grow at 20% compounded
Cost of sales, S G & A average for past three years
96, use same for 97
Depreciation 96-213, 97-213+( 5% of 2400)

Net interest expense 96-129, 97-116


Income tax 45%
Dividends 20% of PAT
Cash 3% of sales
A/R 15% of sales
Inventories 96-given, 97-3148
Gross plant and equipment 96-given, 97-given
Accumulated depreciation from income statement
Current liabilities constant
A/P 6% of sales
Bank debt - plug figure to balance
Accrued expenses 7% of sales
Long term debt decline by 125
Common stock constant
Retained earnings beg RE +PAT-dividends

Ratios 95, 96, 97


Profitability
Return on assets
Gross margin
Return on equity

Liquidity
Current ratio
Quick ratio

Leverage
Debt to assets
Debt to equity
Times interest earned

Activity
Sales/assets
Days receivable
Days inventory
Days payable

Financial Statements - Forecast


Systematic projection expected actions of

management budgets, schedules, financial


statements
Working plan statistics, ratios, relationships, funds
flows, conditions, decisions, activities
Coordinated thinking future
Reduces emergency decisions, surprises
Sets standards of performance measure, control
Anticipate upcoming financial needs

Pro Forma statements - future

Pro forma operating statement


Sales
Trend growth in sales
% increase in number of stores
Inflation rate
Sales per square foot
Sales per employee
Assumptions estimates best guess

Historical relationships
Management forecasts
Industry data
Common sense

COGS percentage of sales


Other items less challenge past ratio

Financial Statements - Forecast


Income statement project other items
Classify cost behavior assumptions vary with sales?
Depreciation new assets
Interest new debt
Taxes rates change
Percentage of sales
Test assumptions constant with sales?
Special cases
Interest - % of total financial liabilities
Adding new L/T assets cost per store?
Tax rate projected EBT
Classification of debt current vs. L/T

1.

2.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
q.

Cash
Accounts Receivable
Inventories
Total current assets
Land, buildings, equip., trucks
Accumulated depreciation
Net fixed assets
Other assets
Total assets
Accounts Payable
Note payable- bank
Accrued expenses & taxes
Total current liabilities
Mortgage payable
Capital stock
Earned surplus
Total liabilities & net worth

2.
Cash
Accounts Receivable
Inventories
Total current assets
Land, buildings, equip., trucks
Accumulated depreciation
Net fixed assets
Other assets
Total assets
Accounts Payable
Note payable- bank
Accrued expenses & taxes
Total current liabilities
Mortgage payable
Capital stock
Earned surplus
Total liabilities & net worth

Hepplefinger & Company


Pro Forma Balance Sheet
June 30, 1961
40,000 (minimum balance)
103,056 (14/360*2,650,000)
258,900 (221,900+2,475,000-2,438,000)
401,956
125,400 (111,400+4,000+10,000)
82,000 (73,700+8,300)
43,400
5,100
450,456
171,875 (25/360*2,475,000)
141,681 (plug figure)
11,300 (same)
324,856
22,500 (24,000-1,500)
75,000 (same)
28,100 (25,300+5,300-2,500)
450,456

3.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.

Sales
Less: Cost of Goods Sold
Direct Labor
Materials
Depreciation
Overhead
Total Cost of Goods Sold
Gross Margin
Sales & administrative expense
Earnings before taxes
Income tax
Net Profit

3b.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
q.

Cash
Accounts receivable
Inventories
Total current assets
Machinery & equipment
Accumulated depreciation
Net fixed assets
Other assets
Total assets
Accounts payable
Accrued wages
Accrued taxes
Total current liabilities
Long Term Debt
Capital stock
Earned surplus
Total liabilities & net worth

3.
IDEAS, INC.
Pro Forma Operating Statement
For the Six Months Ended
(Thousands of dollars)
Sales
Less: Cost of Goods Sold
Direct Labor
Materials
Depreciation
Overhead
Total Cost of Goods Sold
Gross Margin
Sales & administrative expense
Earnings before taxes
Income tax
Net Profit

600 (100*6)
120
160
12
168
460

(20*6)
(40*6-80)
(2 per month*6)
(25/month*6+3/month)
140
108 (18*6)
32
16 (50% of profit)
16

3.
Cash
Accounts receivable
Inventories
Total current assets
Machinery & equipment
Accumulated depreciation
Net fixed assets
Other assets
Total assets
Accounts payable
Accrued wages
Accrued taxes
Total current liabilities
Long Term Debt
Capital stock
Earned surplus
Total liabilities & net worth

IDEAS, INC.
Pro Forma Balance Sheet
At the end of six months
(Thousands of dollars)
15 (given)
133 (600/180*40)
80 (20+60)
228
60 (given)
12 (2 per month*6)
48
5 (given)
281
40 ( 240/180*30)
5 (120/6/4)
16 (above)
61
104
100 (55+45)
16 (above)
281

Read Note on Financial Forecasting;


Read Financial Forecasting Problems;
Assign #10 - Tire City Case (due 3/10, 3/11)
Extra credit cash flows from operations '96 and
'97.