Fifth Homework

The model analyses quarter by quarter. As off now the budget and expected revenue is as follows:

Accounts Receivable Turnover: This ratio decreased, but had a substantial jump to be at 6.35 in 2013.

* If we surmise that the company’s specialist’s predictions of 4% on market growth along with renewing current and or adding more customer contracts then the profits should be as follows:

When forecasting Polymold Division’s financial statements there are some assumptions that need to be taken into account before projecting the numbers. One of the assumptions is

Given the data in this worksheet, what do the aging schedules tell you about customers’ payment patterns at the end of March and June? Explain.

1. In the last five years the growth in sales for the company has been around 10% per annum, except for the 1997, the growth was 18.78%. In the case, nothing is mentioned that company has made any drastic changes in its strategy to grow faster. In such a scenario, projected a consistent growth of 20% per annum for the next 5 years is too optimistic.

Management must make estimates about uncollected receivables when analyzing the adequacy of the company’s allowance for doubtful accounts. This is done by evaluating the business’ account receivables, customer concentrations, historical debts, customer creditworthiness, current economic trends, and changes in its

Analyzing the company’s performance compared to its historical figures is always useful; nevertheless, these historical figures can be also a very useful tool to forecast future ProForma figures. We usually start by forecasting future sales (based on an average increase in sales figure) and other balance sheet and income statement items are forecasted as percentage of sales, this percent is normally consistent from historically figures. A close look should be given to the company’s operations and plan for the coming year while making our assumptions and forecasted figures. Normally we should follow

ROC=11%, NOPAT=$0.48, Hurdle rate = 9.3%, Capital= NOPAT/ROC =0.48/11= $4.3636 billion EP = (11 - 9.3)* 4.3636 = $7.4184 billion

However, the company expects that its sales will grow 25 percent annually for the next five years. As illustrated in Table 1 the demand after 5 years will be approx.

a. Calculate/show the Inventory Turnover and the Days Inventory Held ratios for each quarter. How do these change during the 10-year period? What does this mean?

The sales of SG will total $425,200 with $93,600 from subscriptions and $331,600 from sales of gardens. Revenue for year two raises to $756,800 with $280,800 from subscriptions and $476,000 from sales of gardens. Revenue of the third year increases to $1,109,800 with sales of gardens increasing to $595,000 and subscription revenue to $514,800. Year one to two experiences a 77.8% growth and year two to three experiences 46.7% growth. These numbers are reasonable based on how diligently SG invests in marketing and sales. The reason growth fades from 77.8% down to 46.7% is due to the unlikeliness that extremely high and consistent growth will be sustainable for long periods of time.

As for Accounts Receivable we need to take a look at the ratio called Days Sales in Receivables which is 365 / Receivables Turnover. This is also given to us as 157 days which means that it will take 2.32 times for the company to cover its accounts receivable and

Such an analysis helps the company to figure out the problematic areas within the business. When these are identified, the company can focus on those areas so that it enhances its performance.

Accounts Receivable Turnover measures the number of times, on average, the company collects receivables in the period. The formula is: