Analyzing Pro Forma Statements Essay Example for Free

Analyzing Pro Forma debates EssayUpper management has propositioned the fiscal analysis team to develop Pro Forma financial statements covering the next five course of instructions for the forward-looking product line that increases revenue in a similar but slightly different market. (The ready company is a restaurant group, the make-believe new product is pizza). The financial statement helps assess the mathematical financial impacts of pizza. The Pro Forma statements are based on the true years (2014) Balance shred and do good/Loss Statement and are communicate for an 18% increase in sales severally year for the next five years. Analysis for the Pro Forma statement indicates that sales increases from the 2014 mark of $571,379 to $1,307,177 by the wind up of 2019. Consequently, the project additional revenue lead have the following financial, reflected on the Profit/Loss Statement Cost of Goods Sold increases by $25,000 per year (pizza is a low cost product after the equipment and licence overhead is paid for). Currently COGS is $182,129, after year five the COGS will be $282,129.Therefore projected gross profit will grow to $1,025,048 from $414,250 Wages increase by 12.5% in the first year because of the new hires. Every year after the profit expense increases 2.5% because of merit based raises and bonuses. In 2014 our wage expense is $172,704, by 2019 it will grow to $214,462. Credit Card Fees and Taxes are expected to grow 20% each year because of the additional sales from $14,852 and $17,800 to $37,325 and $44,292 respectivelyThe budget for Supplies, Water/Sewage, Utilities, Repairs and Maintenance will similarly increase every year by 20% given the additional sales. The following table organizes this dataNet profit is projected to grow from $109,531 to $332,283 by 2019The Current Assets accounts of Cash, Accounts Receivables, Inventories, Pre-paid Assets, and Other are also projected to increase. Cash is projected to increase from the c urrent amount of $200,000 to $457,552 by the end of 2019. Accounts Receivables will increase from the current amount of $371,379 to $$849,625.Inventory will increase from the current amount of $9,100 to $20,819 by the end of projected period, and pay Assets will climb from $2,500 to $5,816. Total intractable Assets are not projected to increase, the property and equipment assets associated with Total Fixed assets will depreciate stagnantly by $15,000 over the 5 year projected period. The Asset category, Other will increase from $988 to $2,107. Along with the increase of these asset accounts, the Liabilities Account of Account Payable will increase from $147,179 to $365,682 by the end of 2019.From the prepared Pro Forma projections, expanding the product line to pizza is good for the bottom line. Net Profit will increase by approximately 322%and Cash is projected to increase by 228%. The additional retain earnings over the five year period from the pizza line can be use to finance the project. In other words, by applying the retained earnings from the pizza line project patronise into the company we can finance the project in-house.ReferencesParrino, R., Kidwell, D. S, Bates, T.W. (2012). Fundamentals of corporate finance (2nd ed). Hoboken NJ Wiley.