You have just completed the first year of operation for your business andhave the following information: sales, $200,000; cost of goods, $140,000;rent, $18,000; utilities, $8,400; insurance, $2,000; equipment, $3,500;interest, $10,000. Your forecast indicates that your sales will increase by20 percent. Your rental agreement provides for a 3 percent increase peryear. You read an article indicating that utility costs in your area willincrease by 10 percent next year. You just received a notice from yourinsurance company stating that your quarterly premium is increasing to$600 beginning the first quarter of next year. Your equipment expense willnot change, but the amortization schedule on your current loan indicatesthat interest expense for next year should be $9,000.a. Using this data, construct an actual income statement for this year and a proforma income statement for next year.b. By what percentage did your net income change?c. What are your current profit margin and your pro forma profit margin?d. In your business, assets and liabilities have historically varied with sales.Assets are usually 80 percent of sales, and liabilities are usually 55 percentof sales. You anticipate that you will have no owner payout of net profit.Using the percentage of sales method, determine if any additional financingis needed for your business next year.
You have just completed the first year of operation for your business and
have the following information: sales, $200,000; cost of goods, $140,000;
rent, $18,000; utilities, $8,400; insurance, $2,000; equipment, $3,500;
interest, $10,000. Your
20 percent. Your rental agreement provides for a 3 percent increase per
year. You read an article indicating that utility costs in your area will
increase by 10 percent next year. You just received a notice from your
insurance company stating that your quarterly premium is increasing to
$600 beginning the first quarter of next year. Your equipment expense will
not change, but the amortization schedule on your current loan indicates
that interest expense for next year should be $9,000.
a. Using this data, construct an actual income statement for this year and a pro
forma income statement for next year.
b. By what percentage did your net income change?
c. What are your current profit margin and your pro forma profit margin?
d. In your business, assets and liabilities have historically varied with sales.
Assets are usually 80 percent of sales, and liabilities are usually 55 percent
of sales. You anticipate that you will have no owner payout of net profit.
Using the percentage of sales method, determine if any additional financing
is needed for your business next year.
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