Unit 2 Financial Management Project
Essay by Christy Smith • June 23, 2016 • Research Paper • 612 Words (3 Pages) • 1,158 Views
Part One
- Determine the year-to-year percentage annual growth in total net sales.
To calculate percentage change, the following formula is used:
% change= (New Year net sales-previous year net sales) / (previous year net sales)
- 2004: Starting point: 0%
- 2005: ($11,933-11,062) / ($11,062) = 0.787= 7.87%
- 2006: ($9,181-$11933) / ($11,953) = (-).2306= -23.06%
- 2007: ($6141-$9181) / ($9181) = (-).331= -33.11%
- 2008: ($8334-$6141) / ($6141) =.3571=35.71%
- Using the same formula as stated above, solve for 2009 total net sales at 10% annual revenue growth:
10 %=( x-2008 net sales) / (2008 net sales)
.10= (x-8334) / (8334) = 833.4=(x-8334) x=9167.4 2009 Target Revenue net sales is $9167.40
Yes, I do believe that a company can achieve its target of $9167.40 in 2009. Although the company had a decline in total net sales in 2006 and 2007, it rebounded in 2008 with a 35.71% sales growth. Therefore, I believe that the company has stabilized and can reach its goal of +10% annual revenue growth in 2009.
Part Two
- Use the Percentage Sales Method and a 25% increase in sales to forecast Micro Chip's Consolidated Statement of Operations for the period of September 26, 2008 through September 25, 2009. Assume a 15% tax rate and restructuring costs of 5% of the new sales figure.
(See Chart below) Percent of sales = Dividing the balance for the accounts for 2007-2008 by sales revenue (8334.00) for 2007-2008
For example: % of sales for cost of sales=
(Cost of sales / sales revenue) = $5458 / 8334=.6549=65.49%
(Gross margin/sales revenue) = $2876/8334=.3451=34.51%
(R&D/sales revenue)=525/8334=.0630=6.30%
(Selling, general and administrative /sales revenue) = 691/8334=.0829=8.29%
(Total operating expenses/sales revenue) = 1216/8334=.1459=14.59%
(Operating income/sales revenue) = 1660/8334=.1992=19.92%
(Total interest/sales revenue)=194/8334=.0233=22.25%
(Provision for Income taxes/sales revenue) = 278.10/8334=.0334=3.34%
(Net Income/sales revenue)=1575.90/8334=.1891=18.91%
25% increase in sales = $8334.00 x 1.25+ $10417.50
Assuming all categories do not change from 2008-2009 in regards to % of sales (except for restructuring cost):
2009 FIGURES
Cost of sales: (x / 10417.50) = .6549 = $6822.42
Gross margin: (x/10417.50) = .3451=$3595.08
Total Operating Expenses
R & D= (x / 10417.50) = .0630=$656.30
Selling, general and administrative= (x / 10417.50) = .0829= $863.62
Restructuring Cost= (x / 10417.50 = .05=$520.88
Total operating expenses= selling, general & administrative + restructuring + R&D = $2040.80
% of sales of total operating expenses= (2040.80 / 10417.50) = .1959=19.59%
Operating income % of sales decreases by 5% due to restructuring 5% so:
19.92% - 5% = 14.92%
(x / 10417.50) = .1492= $1554.29
Total interest and other income etc. = (x / 10417.50) = .0233= $242.73
Income before tax will be 5% less than 2008 due to 5% restructuring cost so: (22.25%-5%)=17.25%
Therefore: (x / 10417.50) = .1725= $1797.02
Provision for Income Tax= Income before tax X .15= 1797.02 x .15=$269.55
(269.55 / 10417.50) =.0259=2.59% (% of sales for Provision for tax income)
Net income= Income before provision for taxes – provision for taxes
$1797.02 - $269.55 = $1527.47
% of sales of net income = $1527.47 / 10417.50=.1466=14.66%
2007-2008 | % of sales | 2008-2009 | % of sales | |
Sales | $8334.00 | 100% | $10,417.50 | 100% |
Cost of sales | $5458.00 | 65.49% | $6822.42 | 65.49% |
Gross Margin | $2876.00 | 34.51% | $3595.08 | 34.51% |
Operating Expenses | ||||
R & D | $525.00 | 6.30% | $656.30 | 6.3% |
Selling, General and Administrative | $691.00 | 8.29% | $863.62 | 8.29% |
In-process R & D | 0% | |||
Restructuring costs | 0% | $520.88 | 5% | |
Total Operating Expenses | $1216.00 | 14.59% | $2040.80 | 19.59% |
Operating Income | $1660.00 | 19.92% | $1554.29 | 14.92% |
Total Interest & other Income net | $194.00 | 2.33% | $242.73 | 2.33% |
Income before provision for Income taxes | $1854.00 | 22.25% | $1797.02 | 17.25% |
Provision for Income taxes | $278.10 | 3.34% | $269.55 | 2.59% |
Net Income | $1575.90 | 18.91% | $1527.47 | 14.66% |
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