Elise Lee

Project Part 3
2. The current SG&A to revenues ratio is 28.4%. I did $521,536/$2,181,732). I project the ratio to be 25% for fiscal 2014. This would make the SG&A expense $962,689.25. (In thousands) I got this by multiplying .25 with $3,850,757. I project the ratio to be 25% because of a couple reasons. First, in the MD&A section, it is stated that the SG&A to revenues ratio has decreased from roughly 35% in 2012 to 28.5%. This was due to achieving economies of scale during Fiscal 2013 as compared to Fiscal 2012, as their revenue increased at a greater rate relative to their fixed cost. I have already predicted revenues to grow for Fiscal 2014 due to the projected opening of new retail stores, an increase in shop-in-shops, and a general increase in luxury goods such as accessories, among others. Thus, I project that the revenue will again increase at a greater rate relative to their fixed costs. The SG&A expense will still be greater than the expense in Fiscal 2013. Their expansion will mean an increase in the cost of retail occupancy, salary costs, increases in promotional costs, and corporate employee-related costs. The increase in retail occupancy and payroll costs will be due to the expected opening of new retail stores in Fiscal 2014.
3. I project accounts receivable to increase in Fiscal 2014. I have already projected revenues to increase because I expect an increase in sales. An increase in sales will mean a higher accounts receivable balance. I expect it to increase by $100,000,000 to equal $306,454 (in thousands). I chose this number because it is a reasonably greater increase than the A/R increases from 2012 to 2013. I chose for the growth to be greater because I project much greater revenue for Fiscal 2014 relative to the prior year.
4. Cash can be calculated by the equation: cash from operations – capital