Assumptions for status quo pro forma.
- Sales growth 1.5%
- Use %-of-Sales for COGS, GA&S Expense, Depreciation, and short-term assets and liabilities.
- Dividends will be the same dollar amount as 2009.
- Tax rate is 32%
- $500,000 of long-term debt will be repaid during 2010
- Short-term debt (Bank Loan) is at 7.5% and the long-term debt is at 9%. Compute Interest Expense by assuming that any changes to these balances occur half-way through the year.
Assumptions for new credit policy pro forma.
- Sales growth 6%
- Bad debt expense will be 5% of new Sales (over the 1.5% planned growth)
-Use %-of-Sales for COGS, GA&S Expense, Depreciation, and short-term assets and liabilities.
- Dividends will be the same dollar amount as 2009.
- Tax rate is 32%
- $500,000 of long-term debt will be repaid during 2010
- Short-term debt (Bank Loan) is at 7.5% and the long-term debt is at 9%. Compute Interest Expense by assuming that any changes to these balances occur half-way through the year.
All else will be a percentage of sales. Calculate for 2 years out.
| Income Statement |
2008 |
2009 |
| Sales |
45,670,000 |
46,355,000 |
| Cost of Goods Sold |
28,960,000 |
30,242,000 |
| Gross Margin |
16,710,000 |
16,113,000 |
| Expenses |
|
|
| Selling, General and Administrative Expenses |
6,910,000 |
7,134,700 |
| Bad Debt Expense |
0 |
0 |
| Interest Expense |
1,287,500 |
740,000 |
| Depreciation Expense |
2,100,000 |
2,200,000 |
| Other Expenses |
350,000 |
350,000 |
| Total Expenses |
10,647,500 |
10,424,700 |
|
|
|
| Earnings before taxes |
6,062,500 |
5,688,300 |
| Taxes |
1,940,000 |
1,821,000 |
| Net Income |
4,122,500 |
3,867,300 |
| Dividends |
1400000 |
1400000 |
| to Retained Earnings |
2,722,500 |
2,467,300 |
|
|
|
|
|
|
| Balance Sheet |
|
|
| Assets |
|
|
| Cash and Marketable Securities |
$2,240,000 |
2,890,000 |
| Accounts Receivable |
5,130,000 |
5,220,000 |
| Inventories |
6,050,000 |
5,870,000 |
| Other Current Assets |
300,000 |
320,000 |
| Total Current Assets |
$13,720,000 |
$14,300,000 |
|
|
|
| Plant and Equipment |
62,860,000 |
65,060,000 |
| Accumulated Depreciation |
36,700,000 |
38,900,000 |
| Net Plant & Equipment |
26,160,000 |
26,160,000 |
|
|
|
|
|
|
| Total Assets |
$39,880,000 |
$40,460,000 |
|
|
|
| Liabilities and Equity |
|
|
| Accounts Payable |
$1,846,000 |
1,488,700 |
| Notes Payable - Bank |
800,000 |
0 |
| Current Portion LT Debt |
500000 |
500000 |
| Other Current Liabilities |
1,450,000 |
1,220,000 |
| Total Current Liabilities |
$4,596,000 |
3,208,700 |
|
|
|
| Long Term Debt |
8,500,000 |
8,000,000 |
| Common Stock |
1,000,000 |
1,000,000 |
| Retained Earnings |
25,784,000 |
28,251,300 |
| Total Liabilities + Equity |
$39,880,000 |
$40,460,000 |