- The Thompson Associates Corporation (TAC) has begun selling a new product and they want you to help them with next year’s pro forma financial statements. Using the worksheet below, complete the company’s forecast.
Assumptions:
To begin with, TAC is sure sales will grow 20% next year. Assume that is true. Then assume that COGS, Current Assets, and Current Liabilities all vary directly with Sales (that means if sales grows a certain percentage, then the account in question will grow by that same percentage). Assume that fixed expenses will remain unchanged and that $1500 worth of new Fixed Assets will be obtained next year. Lastly, the current dividend policy will be continued next year.
Thomson Associates Corporation
Financial Forecast
Estimated
This year for next year
Sales $10,000 ________
COGS 4,000 ________
Gross Profit 6,000 ________
Fixed Expenses 3,000 ________
Before‑Tax Profit 3,000 ________
Tax @ 33.3333% 1,000 ________
Net Profit $2,000 ________
Dividends $0 ________
Current Assets $25,000 ________
Net Fixed Assets 15,000 ________
Total Assets $40,000 ________
Current Liabilities $17,000 ________
Long‑term debt 3,000 ________
Common Stock 7,000 ________
Retained Earnings 13,000 ________
Total Liabs & Eq $40,000 ________
(AFN) = ________
- The Thompson Wonders Corporation (TWC) has begun selling a new product and they want you to help them determine if they need additional funding (AFN) next year. Using the AFN formula method, calculate TWC’s AFN for next year (if any).
The company’s latest financial statements are shown below. Sales growth next year is forecast to be 20% and the net profit margin is expected to remain the same as it is this year. Cash, A/R, Inventory, A/P, and Accruals all vary directly with sales. The company is not operating at capacity and expects to be able to handle the increase in sales without adding fixed assets. Also, the company expects to pay out 50% of any profits as dividends.
Thompson Wonders Corporation
Financial Statements
Historical
This year
Income statement:
Sales $1,000
Costs $900
Profit 100
Balance Sheet:
Cash $100
A/R $200
Inventory $200
Fixed assets $500
Total assets $1,000
A/P $50
Accruals $50
N/P $150
LTD $400
Common Stock $100
Ret earnings $250
Total Liabilities & Equity $1,000
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