Selected Companies Pro Forma

1243 Words Aug 14th, 2008 5 Pages
Selected Companies Pro Forma
Apple has become very successful in the technology industry. The company has increased its net sales from 2006 to 2007, which proves they are making good capital budgeting decisions. A pro forma income statement and balance sheet showing the future planning and growth of a company. The pro forma income statement and balance sheet will explain a cash budget, underlying assumptions of calculations, calculations of different ratio analysis, and make recommendations to management. “The most comprehensive means of financial forecasting is to develop a series of pro forma, or projected, financial statements” (2005, Block & Hirt, p. 88, chap. 4).
Financial Statements
A set of financial statements include an income
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Provision of tax is not percentage of sales and calculates based in income before tax. Since goodwill does not change with sales, it remains at the same level. The percentage increase does not affect the acquired tangible assets so values remain the same. Accounts payable receives adjustments in order to equalize the balance sheet. Common stock will not change with assets and stays the same. The retained earnings increase with the net income for 2008. Accumulated other comprehensive income may not change with sales and is taken at the same level.
Ratio Analysis
“The use of ratio analysis is rather like solving a mystery in which each clue leads to a new area of inquiry” (2005, Block & Hirt, p. 55, chap. 3). These ratios help to make pro forma determinations for future years. The first step to making any predictions is to review the current year and past year ratios, making comparisons and determining areas of strengths and weaknesses. Larger companies may require a review of the past five-year’s ratios to obtain detailed analyses of these areas. For this review, we are concentrating on the years 2007 and 2006 and have prepared the following rations for review:
Liquidity & Asset Utilization Ratios 2007 2006 Current Ratio Current Assets 21,956.00 14,509.00 Current
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