Fin531 Week 4 Essay

1414 words - 6 pages

Analyzing Pro Forma Statements
Jodi L Schosek
Finance 571 – University of Phoenix
April 25, 2016

Pro Forma Statements of Mader Construction Inc.

It is assumed that there will be an increase in the sales in reaction to the introduction of the new product and increase in the company’s production capacity.
With increased sale, we will be acquiring fixed assets with the excess cash and will be taking loan as follows:
Mader Construction Incorporated
Pro Forma Income Statement
Income Statement | 2015 | % Ratio to the Sales | 2016 | 2017 | 2018 | 2019 | 2020 |
Revenue (net) | $1,747,698 | 100.0% | $2,097,238 | $2,306,961 | $2,537,657 | $2,791,423 | $3,070,566 |
Cost of ...view middle of the document...

60% | $12,630 | $13,893 | $15,282 | $16,811 | $18,492 |
Receivables | $27,000 | 1.54% | $32,400 | $35,640 | $39,204 | $43,124 | $47,437 |
Inventory | $30,000 | 2.86% | $36,000 | $39,600 | $43,560 | $47,916 | $52,708 |
Prepaid Expenses | $2,000 | 1.10% | $2,400 | $2,640 | $2,400 | $2,640 | $2,400 |
Total Current Assets | $69,525 | | $83,430 | $91,773 | $100,446 | $110,491 | $121,036 |
Net Property, Plant & Equipment | $300,000 | Assumed | $500,000 | $700,000 | $900,000 | $1,100,000 | $1,350,000 |
Total Assets | $369,525 | | $583,430 | $791,773 | $1,000,446 | $1,210,491 | $1,471,036 |
| | | | | | | |
Liabilities | | | | | | | |
Accounts payable | $5,000 | 0.29% | $6,000 | $6,600 | $7,260 | $7,986 | $8,785 |
Revolving lines of credit | $20,000 | Fixed | $20,000 | $20,000 | $20,000 | $20,000 | $20,000 |
Current portion of long term debt | $15,000 | Addition | $30,000 | $42,000 | $40,439 | $39,225 | $39,225 |
Total Current Liabilities | $40,000 | | $56,000 | $68,600 | $67,699 | $67,211 | $68,010 |
Long term debt and capital lease | $45,500 | Addition | $70,203 | $75,424 | $75,424 | $55,424 | $61,586 |
Loans payable to stockholders | $60,500 | Fixed | $60,500 | $60,500 | $60,500 | $60,500 | $60,500 |
Total Long Term Liabilities | $106,000 | | $130,703 | $135,924 | $135,924 | $115,924 | $122,086 |
Total Liabilities | $146,000 | | $186,703 | $204,524 | $203,623 | $183,135 | $190,096 |
Common stock | $1,000 | Fixed | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 |
Additional paid in capital | $25,000 | Fixed | $25,000 | $25,000 | $25,000 | $25,000 | $25,000 |
Retained earnings | $197,525 | | $370,727 | $561,249 | $770,824 | $1,001,355 | $1,254,941 |
Total Liabilities & Shareholder's Equity | $369,525 | | $583,430 | $791,773 | $1,000,447 | $1,210,490 | $1,471,036 |

Analyzing Pro Forma Statements
Financial managers are able to benefit from forecasting financial statements. Pro Forma statements help financial managers schedule accordingly, in terms of the businesses’ financial wants and needs. The amount of financing needed and when it is needed can be determined by gathering estimates of Maders future balance sheet accounts and income statement. Therefore, the purpose of the Pro Forma analysis is to forecast Maders financial statements under a special condition (Parrino et al., 2012).
Subsequently, total assets must equal the amount of total liabilities and of owner’s equity; otherwise the manager must consider corrective disciplines (Parrino et al., 2012). The Pro Forma analysis has been proven to be contributory for financial managers in the planning of inventory and employment powers; more specifically, problems solving problems.
During the developing stages of the sales forecasting, managers are allowed to analyze the outcomes; identifying potential “danger zones” and...

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