FINANCIAL FORECAST

The attached financial statements (income statements, balance sheets and statements of cash flow) can be used to assist in forecasting results for the next 1-1/2 half years. In addition, the RMA ratios can also be used to determine forecasted financials. The assumptions to be used in the forecast are as follows:

  1. Net sales are forecasted to total $2.7 million, a drop from 1990 to 1991. Net sales are expected to improve in 1992 to a level of $3 million

  2. Gross profits are expected to drop to 36% of sales for the entire year 1991 and to drop further to 35% of net sales in 1992.

  3. Sales expenses are projected to increase in the second half of 1991 with the total year 1991 amounting to $169,000. Sales expenses for 1992 are projected to increase by 5% over those in 1991.

  4. Administrative expenses are expected to increase to a projected $452,400 for all of 1991 and to $481,200 in 1992.

  5. Depreciation will amount to $36,300 for all of 1991 and $20,000 for 1992.

  6. Other expense will increase to $27,800 for all of 1991 and will amount to $20,800 in 1992. (This results from

    substantial increases in interest costs resulting from acquisition debt.)

  7. Income taxes include both state and federal taxes and will amount to 32.69% of pretax profits in 1991 and

    39.22% of pretax profits in 1992. (This is a higher rate than that historically experienced because of the

    previous use of tax credits that reduced income tax to a lower than normal rate.)

  8. There will be no profit sharing bonuses in 1991 and 1992.

  9. Accounts receivable will amount to 43 days of sales at the end of 1991 and will hold at the same dollar figure

    at the end of 1992. (Hint: Don’t enter cash into the balance sheet initially. Use cash as the “plug” figure.)

  10. Inventory at the end of 1991 will amount to 59.07days of 1991 Cost of Sales and will hold the same dollar

    figure at the end of 1992.

  11. Prepaid expenses will amount to the same dollar figure at the end of 1991 and 1992 as it was on April 30,

    1991.

  12. There will be no additions to fixed assets in the last fiscal half of 1991 and additions to fixed assets will

    amount to $20,000 during 1992.

  13. The current portion of long term debt will amount to $49,700 at the end of 1991 and $42,300 at the end of

    1992.

  14. Accounts payable will amount to 35.43 days of 1991 cost of sales at the end of 1991 and will amount to 35.04

    days of 1992 projected cost of sales.

  15. Accrued expenses will amount to $38,400 at the end of 1991 and $40,000 at the end of 1992.

  16. Long term debt net of the current portion will amount to $182,700 at the end of 1991 and to $140,400 at the

    end of 1992.

  17. Common stock will remain at $9,800 at the end of 1991 and 1992.

  18. Retained earnings will increase or decrease by the amount of after tax profit or loss during the period covered

    by the statements.

  19. There will be no distributions from retained earnings to shareholders during the forecast period.

    ASSIGNMENT

Please complete the forecasted financial statements by filling in the blanks on the attached statements. 

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    ritu_accts_final.xlsx