Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
PRO FORMA INCOME STATEMENT At the end of last year, Roberts Inc. reported the following income statement (in millions of dollars):
| Sales | $3,000 |
| Operating costs excluding depreciation | 2,450 |
| EBITDA | $ 550 |
| Depreciation | 250 |
| EBIT | $ 300 |
| Interest | 125 |
| EBT | $ 175 |
| Taxes (40%) | 70 |
| Net income | $ 105 |
Looking ahead to the following year, the company’s CFO has assembled this information:
• Year-end sales are expected to be 10% higher than the $3 billion in sales generated last year.
• Year-end operating costs, excluding depreciation, are expected to equal 80% of year-end sales.
• Depreciation is expected to increase at the same rate as sales.
• Interest costs are expected to remain unchanged.
• The tax rate is expected to remain at 40%.
On the basis of that information, what will be the forecast for Roberts’ year-end net income?
To determine: The net income of R Incorporation.
Introduction:
Income Statement:
This is the statement that gives the information related to the net income of the company. Income statement is the part of financial statement of the company. It gives the information about the income earned or the loss suffered by the company during a year.
| R Incorporation | |
| Projected Income Statement | |
| For the year ended 20XX | |
| Particulars |
Amount ($) in millions |
| Sales | 3,300 |
|
Less: Operating cost excluding depreciation | 2,640 |
| EBITDA | 660 |
| Less: Depreciation | 275 |
| EBIT | 385 |
| Less: Interest | 125 |
| EBT | 260 |
| Less: Taxes (40%) | 104 |
| Net Income | 156 |
Table-1
Working Notes:
Calculate sales
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