...Prepare one indirect cash flow statement (operating-investing-financing) for 2004-2005 and a second one for 2005-2006. Do not aggregate any accounts. 2. Calculate common-size income statement for each year. 3. Calculate all financial ratios (use “A Basis Set of Financial Ratios”) for each year. You will always be expected to have all ratios and cash flows statements for all years of data. Coming to class without all if these completed means that you are unprepared for quizzes and class discussions. 4. Identify the major factors influencing Riley’s cash flow. Use the cash flow statements together with the ratios and common-size statements. 5. What is the length of Riley’s cash conversion cycle? Does it take a long time for Riley to go from spending cash to receiving cash? Why? 6. What are the implications of Riley’s cash flow for the financing needs of the firm? Westmoreland Inc. 1. Examine the beginning financial statements (2005) and the pro forma statements (2006 projected) for Westmoreland (Exhibit 1). Do complete ratio, common-size income statement and cash flow statement analyses with these data. The pro forma statements reflect management’s opinion about what will happen in the future. Incorporated into these statements is their business plan. 2. What is Westmoreland’s condition in 2005? 3. What are the key assumptions that are built into Westmoreland’s pro formas? At this point, do not focus on what did happen in the future. Concentrate...
Words: 2069 - Pages: 9
...Check Point Financial Forecasting November 12, 2012 The most comprehensive means of financial forecasting is to develop a series of pro forma, or projected, financial statements. Financial forecast is about the pro-forma income statement, cash budget, and pro-forma balance sheet. The statements are often required by bankers and other lenders as a guide for the future. A brand new company needs to have sales projection plan, production plan, and have a pro forma income statement because it is a new business, so it would not have any prior financial reports. If there was a new business that I would trying to open, I would have to know, how much money products are going to cost, how much revenue. I would need to make and what is expected of the business. Family owned company, would need the same thing. It is still treated like a brand new company because you still need financial reports, which are production plan, cash balance and sales projections to get the banks to finance and to know how the bill are going to be paid. A long-standing corporation is a little different because they have been there longer and there are more financial statements. There are pro-forma income statements, cash budget, and other budgets used together equal pro-forma balance sheet are used by business small and large to obtain lending, set production levels, forecast sales, and forecast profits. There is an end budget plan because the business has been there longer, than the other...
Words: 275 - Pages: 2
...Pro forma Statements∗ After thoroughly analyzing a company's current situation and the road it took to get there, it is natural to next ask where it is going. The answer will depend on numerous factors including the economic environment, competition, customer tastes, and both strategic and tactical choices. It is the job of the pro forma financial statements to translate these operational forces into numerical estimates of expected financial performance. There are several reasons for projecting future financial performance. First, pro forma statements are very useful when evaluating alternative business strategies. It is one thing to discuss strategy at the conceptual level, but much more valuable to be able to identify the profit and funding effects of alternative strategies. Second, evaluating alternative future events permits explicit measurement of risk. Financial projections do not eliminate the sources of risk. However, they do help the decision‐maker find which risks are important and how realizations of those risks will affect the company. Finally, pro forma statements identify the amount of funds needed and assist in deciding on the appropriate structure for the funding. It is simply not possible to develop an adequate funding plan without relying on pro forma statements. Pro forma statements provide financial estimates of the impact of a business plan. As such, pro formas incorporate the following information: • A marketing plan indicating what will...
Words: 5514 - Pages: 23
...develop a series of pro forma, or projected, financial statements. Based on the projected statements, any firm is able to estimate its future level of Receivables inventory, payables, and other corporate accounts as well as its anticipated profits and borrowing requirements. A brand new company needs to have a sales projection plan, production plan, to put together a pro forma income statement a new company doesn’t have a prior balance sheet, a income statement, cash balance sheet and other budgets plans would be used to secure operating capital and loans from the bank. I as a new company would need to know how much product we need to make, how much each item cost to make, and how much revenue is expected. A family owned company is in the same boat, sales projection, production plan, cash balance and any other plans are needed in this situation. I really don’t see any difference in this situation then a new business. Knowing a family business has a sales plan and budget sheets, is necessary to get lending from the bank and for planning on how to pay personal monthly bills. A long standing company is no different, and then the previous two companies otherwise it would be long standing. Pro forma income statements, cash budget, and other budgets used together equal a pro forma balance sheet are used by business small and large to obtain lending, set production levels, forecast sales, and forecast profits. What financial forecasting is looking at is the pro forma balance sheet this...
Words: 328 - Pages: 2
...Wireless World Budget Proposal For 2010-2015 BUSN-278 Fall 2010 Professor Rebecca Boling Annie Hogan DeVry University ------------------------------------------------- Table of Contents Section | Title | Subsection | Title | Page Number | 1.0 | Executive summary | | | 3 | 2.0 | Sales Forecast | | | 3 | | | 2.1 | Sales Forecast | 3 | | | 2.2 | Methods and Assumptions | 3 | 3.0 | Capital Expenditure Budget | | | 4 | 4.0 | Investment Analysis | | | 4 | | | 4.1 | Cash flows | 4 | | | 4.2 | NPV Analysis | 4-5 | | | 4.3 | Rate of Return Calculations | 5 | | | 4.4 | Payback Period Calculations | 6 | 5.0 | Pro Forma Financial Statements | | | 6 | | | 5.1 | Pro Forma Income Statement | 6 | | | 5.2 | Pro-Forma Cash flow Statement | 6 | | | 5.3 | Pro-Forma Balance Sheets | 7 | 6.0 | Works Cited | | | 7 | * * * * Wireless World is a retail store that sells strictly wireless products developed and geared towards busy individuals who need their product to match their on-the-go lifestyle. The products sold here include phones, notebooks, netbooks, eReaders, iPads, and other similar wireless products. The target demographic for Wireless World includes adults ranging from early twenties to late forties who lead very active and organized lifestyles. Our target market has an interest in wireless gadgets and the potential they hold. This store will be located in a large shopping center called Millenia...
Words: 1402 - Pages: 6
...Chapter 4 Cash Flow and Financial Planning ( Instructor’s Resources Overview This chapter introduces the student to the financial planning process, with the emphasis on short-term (operating) financial planning and its two key components: cash planning and profit planning. Cash planning requires preparation of the cash budget, while profit planning involves preparation of a pro forma income statement and balance sheet. The text illustrates through example how these budgets and statements are developed. The weaknesses of the simplified approaches (judgmental and percent-of-sales methods) of pro forma statement preparation are outlined. The distinction between operating cash flow and free cash flow is presented and discussed. Current tax law regarding the depreciation of assets and the effect on cash flow are also described. The firm’s cash flow is analyzed through classification of sources and uses of cash. The student is guided in a step-by-step preparation of the statement of cash flows and the interpretation of this statement. This chapter ties in every person’s need to set goals, estimate income, and budget expenditures to the firm’s need to effectively engage in these activities. ( Answers to Review Questions 1. The first four classes of property specified by the MACRS system categorized by the length of the depreciation (recovery) period are called 3-, 5-, 7-, and 10-years property: |Recovery Period |Definition ...
Words: 5923 - Pages: 24
...Unit 2 Study Questions Q1：What is the Case? (1)event?(2)Companies?(3)Persons?(4)Time? What is the problem?(5)Why is the problem?(6)Possible Solutions? Q2：Analyses (1) Background of Chef’s Toolkit Inc. ? (2) CV of managers? (3)What is the invention? (4)Company Size-up: production, marketing, and financial status? Q3：Budgeting(monthly sales : 10,000; 5,000; 30,000): production schedule, cash budget, Pro-forma income statement, Pro-forma balance sheet Q4：How can the firm avoid loss? Break –even calculation? Q5: How much money do the firm need for financing? Should Dale Raid invest? What are his risks? 3 Case Summary（案例） M r. P eter Jeffery President of Chef’s Toolkit Inc. M r. Dale Reid Private Investor 风险投资家 Obtain funds to start manufacturing and marketing a new pasta server. 4 Case Summary（案例） Produce Sell Chef’s Toolkit Inc. Pasta Server 意大利通心粉 Chef or Housewife 5 Objectives（目标） Produce projected income statements, balance sheets, and cash flow statement up to July 31, 1995. 预计财务报告 Obtain fund from Dale Reid. 6 Why Budget? 预算 If you know where you are going, you’re more likely to get there…. Plan Perform Evaluate Report 7 Preparation of the Budget for a Manufacturing Organization 销售预算 生产预算 成本和费用预算 现金预算 预计的财务报告 8 Preparation of the Cash Budget for Chef’s Toolkit Inc. Production Schedule 生产计划 Cash Budget 现金预算 Pro-forma income statement Pro-forma balance sheet 预计的利润表 ...
Words: 563 - Pages: 3
...Budgets and pro forma statements were utilized to predict how much cash on hand would be available for capital improvements and production capacity increases by estimating future sales and expenses to estimate the amount of revenue the company would take in in each quarter, the expenses incurred each quarter and the amount of cash left over for use by the company. Estimating cash on hand at the end of each quarter allowed for the decision of increase of production capacity each quarter of the simulation results. Pro Forma statements were utilized to ensure cash on hand was enough to cover future sales office openings and production increases, as well as allow the company to weather unforeseen economic events. Using a conservative approach to predicting sales and revenues allowed the company to accomplish this goal. However, the economic conditions of the simulation did not warrant this conservative approach and a much more aggressive cash management strategy could have been utilized to increase return on investment that was lost due to the amount of cash on hand sitting idle at the end of each quarter. For the first quarter, the pro forma statements showed excess of cash on hand, so the decision was made to deposit a portion of excess cash to be put into a certificate of deposit so it would be generating interest income instead of sitting idle, since the projected revenue from sales and increased costs from marketing would leave ample cash flow for the increase in production...
Words: 2085 - Pages: 9
...Chapter 4 Financial Planning and Forecasting LEARNING OBJECTIVES After reading this chapter, students should be able to: • Briefly explain the following terms: mission statement, corporate scope, corporate purpose, corporate objectives, and corporate strategies. • Briefly explain what operating plans are. • Identify the six steps in the financial planning process. • List the advantages of computerized financial planning models over “pencil-and-paper” calculations. • Discuss the importance of sales forecasts in the financial planning process, and why managers construct pro forma financial statements. • Briefly explain the steps involved in the percent of sales method. • Calculate additional funds needed (AFN), using both the projected financial statement approach and the formula method. • Explain the conditions under which the percent of sales method should not be used. • Identify other techniques for forecasting financial statements discussed in the text and explain when they should be used. LECTURE SUGGESTIONS In Chapter 3, we looked at where the firm has been and where it is now--its current strengths and weaknesses. Now, in Chapter 4, we look at where it is projected to go in the future. The details of what we cover, and the way we cover it, can be seen by scanning Blueprints, Chapter 4. For other suggestions about the lecture, please see the “Lecture Suggestions” in Chapter 2, where we describe...
Words: 6865 - Pages: 28
...Questions Q1：What is the Case? (1)event?(2)Companies?(3)Persons?(4)Time? What is the problem?(5)Why is the problem?(6)Possible Solutions? Q2：Analyses (1) Background of Chef’s Toolkit Inc. ? (2) CV of managers? (3)What is the invention? (4)Company Size-up: production, marketing, and financial status? Q3：Budgeting(monthly sales : 10,000; 5,000; 30,000): production schedule, cash budget, Pro-forma income statement, Pro-forma balance sheet Q4：How can the firm avoid loss? Break –even calculation? Q5: How much money do the firm need for financing? Should Dale Raid invest? What are his risks? 3 Case Summary（案例） M r. P eter Jeffery M r. Dale Reid Private Investor President of 风险投资家 Chef’s Toolkit Inc. Obtain funds to start manufacturing and marketing a new pasta server. 4 Case Summary（案例） Sell Produce Chef’s Toolkit Inc. Pasta Server Chef or Housewife 意大利通心粉 5 Objectives（目标） Produce projected income statements, balance sheets, and cash flow statement up to July 31, 1995. 预计财务报告 Obtain fund from Dale Reid. 6 Why Budget? 预算 If you know where you are going, you’re more likely to get there . Plan Perform Evaluate Report 7 Preparation of the Budget for a Manufacturing Organization 销售预算 生产预算 成 和费用预算 现金预算 预计的财务报告 8 Preparation of the Cash Budget for Chef’s Toolkit Inc. Production Schedule Cash Budget Pro-forma income statement 预计的利润表 生产计划 现金预算 Pro-forma balance sheet ...
Words: 620 - Pages: 3
... A comprehensive (master) budget is a formal statement of management’s expectations regarding sales, expenses, volume, and other financial transactions of the organization for the coming period. Simply put, a budget is a set of pro forma (projected or planned) financial statements. It consists of a pro forma income statement, pro forma balance sheet, and cash budget. A budget is a tool for both planning and control. At the beginning of the period, the budget is the plan or standard; at the end of the period it serves as a control device to help management measure its performance against the plan so that the future performance may be improved. International Paper, a large forest-products company, uses key budgets, including sales and expense projections, as the starting point for the developing business strategies. Prior to development of the budget, certain questions must be asked and certain assumptions must be made. What will be the inflation rate be? Where is the competition headed? Will suppliers increase prices? Will costumer tastes change? You also must explore the financial alternatives available for you. For instance, what will occur if you raise your selling price? What will be the effect if one variable (e.g., advertising) is changed? It is important to realize that with the aid of computer technology, budgeting can be used as an effective device for evaluation of “what-if” scenarios. Through the use of simulations you...
Words: 1408 - Pages: 6
...------------------------------------------------- Jones Electrical Distribution In the past several years, Jones Electrical Distribution is profitable, but it is in the condition of cash shortage. With its 2007’s sales go up, Jones need borrow more money to help its rapid development. Then he got a maximum line of credit $350,000. With our analysis report, we help Jones to choose whether to take advantage of 2% trade discount, we can observe that Jones’credit line will be $318,000 without discount, not $387,000 with this 2% discount. Problems Statement Jones Electrical Distribution’s current condition is not only cash shortage but also under rapid sales grows’ effect. Why this profitable firm needs to increase its borrowing, what kinds of strategies Jones Electrical Distribution will choose, and what his estimate of the loan needs is. These are the problems we will talk about bellows. Data Analysis 1. According to the balance sheet and sources and uses statements (appendix 1), we can see that the line of credit payable increases every year, because Jones needs more and more funds to support the needs of working capital and invest to long-lived assets such as plant, property and equipment to support higher sales levels. We can see that Jones used its profits (changed in Net Worth), cash and short-term debt to support the needs of working capital and the increase of inventory (probably to support higher sales levels). The reduction in long-term debt is a use of funds because Jones is repaying...
Words: 1166 - Pages: 5
...Chapter 09 Prospective Analysis Multiple Choice Questions 1. When preparing a projected income statement, which of the following additional information, other then the financial statements would probably not be relevant? A. The competitive environment B. New versus old store mix C. Expected capital expenditure D. Expected level of macroeconomic activity 2. The reliability of a short-term cash forecast depends most heavily on the quality of: A. Cost of goods sold forecast B. Current ratio forecast C. Sales forecast D. Shares outstanding forecast 3. What is the correct order of the following steps in preparing a projected income statement (not all steps may be shown)? I. Project future net sales II. Project future net income III. Project future cost of goods sold IV. Project future interest expense A. I, II, III, IV B. II, IV, III, I C. I, III, II, IV D. I, III, IV, II 4. What is the correct order of the following steps in preparing a projected balance sheet (not all steps may be shown)? I. Project future cash II. Project future accounts receivable III. Project future accounts payable IV. Project future property plant and equipment A. I, II, IV, III B. II, IV, III, I C. I, III, II, IV D. I, III, IV, II The treasurer of Simmons Corporation, a newly formed software company is trying to ascertain Simmons cash flows for the next three months. Expected sales are: 50% of sales are made for cash. Simmons expects...
Words: 4066 - Pages: 17
...RJCT Task 1 Marketplace Simulation – Smart Systems A. Documents • Fourth quarter cumulative balanced scorecard. • Income statements for the four quarters • Balance sheets for the four quarters Fourth quarter cumulative balanced scorecard – Smart Systems Minimum Maximum Average Smart Systems Total Overall 0.00 444.77 5.76 20.03 Financial Performance -53.84 186.46 5.13 51.97 Market Performance 0.00 0.67 0.06 0.24 Marketing Effectiveness 0.00 0.81 0.12 0.73 Investment in Future 0.00 267.79 0.58 1.49 Wealth -0.90 4.57 0.24 1.94 Human Resource Management 0.00 0.81 0.12 0.70 Asset Management 0.00 2.13 0.18 1.46 Manufacturing Productivity 0.00 1.00 0.12 0.76 Financial Risk 0.00 1.00 0.16 1.00 Income Statement – Smart Systems Income Statement Quarter 1 Quarter 2 Quarter 3 Quarter 4 Gross Profit Revenues 0 2,292,030 6,805,030 15,734,725 - Rebates 0 120,625 241,200 524,800 - Cost of Goods Sold 0 1,491,528 4,012,841 8,427,764 = Gross Profit 0 679,877 2,550,989 6,782,161 Expenses Research and Development 120,000 0 60,000 60,000 + Advertising 0 160,000 268,875 320,798 + Sales Force Expense 0 120,186 319,875 546,937 + Sales Office Expense 220,000 330,000 470,000 370,000 + Marketing Research 0 15,000 15,000 15,000 + Shipping 0 36,184 86,397 141,905 + Inventory Holding Costs 0 9,727 13,220 0 + Excess Capacity Cost 0 255,693 528,982 0 + Depreciation 0 25,000 70,833 95,833 = Total Expenses...
Words: 3919 - Pages: 16
...Reliance Case Questions (12 Points Possible) A. Situation Overview (2 Points Possible) What are the strengths and weaknesses of the RBS brand? You clearly identified issues related to the central decisions in the case. Your analysis was clearly linked to facts from the case. (2 Points Earned) Your analysis was unclear or was not supported by facts from the case. (1 Point Earned) Substantive omissions were made in your analysis. (0 Points Earned) B. Past Promotional Events (2 Points Possible) Analyze the effectiveness of past RBS consumer and trade promotions. How have the promotional strategies impacted sales volume? What kind of return on investment is the company getting for consumer promotions and trade promotions? You provided a well-reasoned financial analysis that was supported by facts from the case. (2 Points Earned) Your analysis was incomplete or was not supported by facts from the case. (1 Point Earned) Substantive omissions were made in your analysis. (0 Points Earned) C. Push vs. Pull (2 Points Possible) Compare the relative merits of a push vs. a pull strategy for the marketing a low-involvement, lowprice grocery item in a mature market setting. You clearly identified the relevant strategic considerations of the two strategies case and provided a well-reasoned analysis based on those considerations. (2 Points Earned) You were not clear in your identification of the relevant strategic considerations. Your analysis was incomplete or was not supported by facts from...
Words: 522 - Pages: 3
