X_SUP
X_SUP Paddle board (X_SUP) company sells stand-up paddle boards(SUPs) & accessories. X_SUP had a great 2014 and anticipates abanner year in 2015. To prepare for 2015 the owners, asked you tocreate pro forma financial statements for 2015.
They would like 2 sets of pro-formas.
One that shows the company operating as it has been (theBusiness-As-Usual scenario),
The Second set that shows financing need if they could takesupplier 2% discounts. To take the discounts they would have to payAccounts Payable in 10 days, so the year-end A/P balance would be10-days of COGS. Inventory and COGS would be 2% lower than in thebusiness-as-usual scenario.
Assumption for Business-As-Usual Scenario
Sales from 2014 to 2015 increase by 25% COGS remain at 70% ofSales GA&S Expense increases to $145,000 Interest Expense willbe 8.5% of the year-end Bank Loan balance Depreciation Expense willbe $10,000 in 2015 X_SUP will purchase $30,000 of long-termdepreciable assets in 2015 Cash, Accounts Receivable, AccountsPayable and Inventory will be the same %-of-Sales in 2015 as theywere in 2014. Common Stock is unchanged. All profits (Net Income)are retained to finance future growth. Bank Loan is the plugfigure. If this is negative then Cash becomes the plug figure.
Assumption for 2% Discount-Pay in 10-daysScenario
Use the assumptions above for the Business-As-Usual scenarioexcept: COGS will be 98% of the BAU COGS because of the 2% supplierdiscount. Inventory and A/Payable must be adjusted for the 2%discount. Inventory will be based on the 2% discount. AccountsPayable will be 10-days of COGS at year-end (Use a 365-day year)Interest Expense will be 8.5% of the year-end Bank Loan balance.Bank Loan is the plug figure. If this is negative then Cash becomesthe plug figure.
Assignment:
Create the pro forma financial statements and highlight the loanneed.
X_SUP Income Statement 2014Actual 2015 ProForma 2015 ProForma (10 -day AP) Sales 550,000.00 COGS 385,000.00 Gross Margin 165,000.00 GA&S Expense 110,000.00 Interest Expense 7,300.00 Depreciation Expense 7,500.00 Taxable Income 40,200.00 Taxes (30%) 12,060.00 Net Income 28,140.00 Balance Sheet Assets 2014Actual 2015 ProForma 2015 ProForma (10 -day AP) Cash 5,500.00 A/Receivables 22,000.00 Inventory 167,500.00 Total Current Assets 195,000.00 Net Fixed Assets 80,000.00 Total Assets 275,000.00 Liabilities & Equity 2014 A/Payable 39,600.00 Bank Loan (8.5%) 86,000.00 Total Current Liabilities 125,600.00 Common Stock 40,000.00 Retained Earnings 109,400.00 Total Liabilities & Equity 275,000.00 343,750.00
X_SUP
X_SUP Paddle board (X_SUP) company sells stand-up paddle boards(SUPs) & accessories. X_SUP had a great 2014 and anticipates abanner year in 2015. To prepare for 2015 the owners, asked you tocreate pro forma financial statements for 2015.
They would like 2 sets of pro-formas.
One that shows the company operating as it has been (theBusiness-As-Usual scenario),
The Second set that shows financing need if they could takesupplier 2% discounts. To take the discounts they would have to payAccounts Payable in 10 days, so the year-end A/P balance would be10-days of COGS. Inventory and COGS would be 2% lower than in thebusiness-as-usual scenario.
Assumption for Business-As-Usual Scenario
Sales from 2014 to 2015 increase by 25% COGS remain at 70% ofSales GA&S Expense increases to $145,000 Interest Expense willbe 8.5% of the year-end Bank Loan balance Depreciation Expense willbe $10,000 in 2015 X_SUP will purchase $30,000 of long-termdepreciable assets in 2015 Cash, Accounts Receivable, AccountsPayable and Inventory will be the same %-of-Sales in 2015 as theywere in 2014. Common Stock is unchanged. All profits (Net Income)are retained to finance future growth. Bank Loan is the plugfigure. If this is negative then Cash becomes the plug figure.
Assumption for 2% Discount-Pay in 10-daysScenario
Use the assumptions above for the Business-As-Usual scenarioexcept: COGS will be 98% of the BAU COGS because of the 2% supplierdiscount. Inventory and A/Payable must be adjusted for the 2%discount. Inventory will be based on the 2% discount. AccountsPayable will be 10-days of COGS at year-end (Use a 365-day year)Interest Expense will be 8.5% of the year-end Bank Loan balance.Bank Loan is the plug figure. If this is negative then Cash becomesthe plug figure.
Assignment:
Create the pro forma financial statements and highlight the loanneed.
| X_SUP | |||
| Income Statement | 2014Actual | 2015 ProForma | 2015 ProForma (10 -day AP) |
| Sales | 550,000.00 | ||
| COGS | 385,000.00 | ||
| Gross Margin | 165,000.00 | ||
| GA&S Expense | 110,000.00 | ||
| Interest Expense | 7,300.00 | ||
| Depreciation Expense | 7,500.00 | ||
| Taxable Income | 40,200.00 | ||
| Taxes (30%) | 12,060.00 | ||
| Net Income | 28,140.00 | ||
| Balance Sheet | |||
| Assets | 2014Actual | 2015 ProForma | 2015 ProForma (10 -day AP) |
| Cash | 5,500.00 | ||
| A/Receivables | 22,000.00 | ||
| Inventory | 167,500.00 | ||
| Total Current Assets | 195,000.00 | ||
| Net Fixed Assets | 80,000.00 | ||
| Total Assets | 275,000.00 | ||
| Liabilities & Equity | 2014 | ||
| A/Payable | 39,600.00 | ||
| Bank Loan (8.5%) | 86,000.00 | ||
| Total Current Liabilities | 125,600.00 | ||
| Common Stock | 40,000.00 | ||
| Retained Earnings | 109,400.00 | ||
| Total Liabilities & Equity | 275,000.00 | 343,750.00 |
