Projected Financial Statements

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Projected Financial Statements

Use the TJX Companies, Inc. (2015) financial statements as of February 1, 2015 (p. 441) to project future years of your implementation.

Tips:

  • You may use the downloadable template provided on the strategyclub.com website
    • Enter the financial data on Worksheet Part II
    • Use TJX Companies, Inc. (2015) financial statements as of February 1, 2015 (p. 441)
  • Financial ratios: You may need to calculate ratios to project financial data for future years.
  • Balance sheet
    • How will your recommended strategies be funding? Cash, debt, shareholders’ dividends?
    • How will assets, liabilities, and shareholders’ equity be affected by your strategies?
  • Income Statement
    • How will your recommended strategies affect revenue? Will revenues decrease initially? When will revenues increase?
    • What expenses are involved to implement your recommended strategies? When will these costs be incurred? When will these costs decrease or no longer be required?
  • EPS/EBIT Analysis
    • How will your strategies affect EPS?
    • Will shares be used to finance the implementation of the proposed strategies?
    • How will a decline or increase in revenue affect EPS?
    • How will earnings be affected?
    • What will be the effect on taxes?
  • Do not increase all financial statement categories by the same amount or percentage.  This is not reasonable.
  • See Chapter 8, pages 255-262), for information about how to project financial statements and the Chapter 8 PowerPoint slides.
  • Use the resources in the Collaboration and Community Center forum of the Discussion Board regarding projecting financial statements.

Projected Balance Sheet

Tip: Balance Sheet (see Exhibit 6, page 441) including assets (e.g., cash and cash equivalents, accounts receivable, inventories, other current assets, property, plant & equipment, goodwill & intangibles, other assets); liabilities (e.g., accounts payable, other current liabilities, long-term debt, other liabilities); and equity (e.g., common stock, retained earnings, other equity, paid in capital).

Fill out the appropriate columns for the number of years that are needed for your recommendations to be implemented.

Actual February 1, 2015

Projected February 1, 2016

Projected February 1, 2017

Projected February 1, 2018

Projected February 1, 2019

Projected February 1, 2020

Assets

Cash and cash equivalents

$2,494

Accounts receivable

283

Inventories

3,218

Other current assets

720

Total current assets

6,715

Property, plant & equipment

3,868

Goodwill & intangibles

310

Other assets

235

Total assets

11,128

Liabilities

Accounts payable

2,008

Other current liabilities

1,922

Total current liabilities

3,930

Long-term debt

1,624

Other liabilities

1,310

Total liabilities

6,864

Common stock

685

Retained earnings

4,134

Other equity

(554)

Paid in capital

---

Total equity

4,264

Total liabilities & equity

11,128

Projected Income Statement

Tip: Income Statement (Exhibit 5, page 441) revenue (e.g., revenue, cost of sale) and expenses (e.g., operating expenses, EBIT, interest, EBT, tax, net income).

Fill out the appropriate columns for the number of years that are needed for your recommendations to be implemented.

Projected Income Statement

Actual February 1, 2015

Projected February 1, 2016

Projected February 1, 2017

Projected February 1, 2018

Projected February 1, 2019

Projected February 1, 2020

Revenues

$29,078

Cost of sales

20,777

Operating expenses

4,712

EBIT

3,589

Interest

40

EBT

3,549

Tax

1,334

Net income

2,215

Projected EPS/EBIT analysis

Tip: Use the data from the projected balance sheet and projected income statements to perform the EPS/EBIT analysis.

----Insert projected EPS/EBIT Analysis here---

Common Stock Financing

Debt Financing

Stock

Recession

Normal

Boom

Recession

Normal

Boom

Recession

Normal

Boom

EBIT

$0

$0

$0

$0

$0

$0

$0

$0

$0

Interest

0

0

0

0

0

0

0

0

0

EBT

0

0

0

0

0

0

0

0

0

Taxes

0

0

0

0

0

0

0

0

0

EAT

0

0

0

0

0

0

0

0

0

# Shares

0

0

0

0

0

0

0

0

0

EPS

$0.00

$0.00

$0.00

$0.00

$0.00

$0.00

$0.00

$0.00

$0.00

Here are some entries you may want to consider:

·         EBIT Normal:  $3,589 million (Assumption: from February 1, 2015 Income Statement)

·         EBIT Recession: $3,100 million (Assumption: earnings lower during recession)

·         EBIT Boom: $4,200 million (Assumption: earnings higher during boom)

·         Interest rate: 3.5% (Prime interest rate)

·         Tax rate: 38% (Assumption: Tax  / EBIT both figures from February 1, 2015 Income Statement) 

·         Percent Equity Used to Finance: 70% (Assumption: Beginning point of analysis; Any combination of equity/debt financing can be used)

·         Percent Debt Used to Finance: 30% (Assumption: Beginning point of analysis

David, F. R., & David, F. R. (2017). Strategic management: A competitive advantage approach, concepts and cases (16th ed.). Boston, MA: Pearson. ISBN: 9780134167848.

INFORMATION ON PAGE 441 FOUND BELOW: 

There are about 16,000 vendors around the world, mainly manufacturers and other retailers. TJX purchases “less-than-full” assortment items, of quantity from small to large, and in different styles and sizes. TJX pays vendors promptly and therefore has no need for any retail concessions like promotion or mark-down allowances, or delivery concessions like discount on shipment cost, or reliance on a “return policy” discount. When appropriate, TJX will purchase inventory to sell at a future time, in spite of its usual policy of adhering to a lean and rapid turnover of inventory.

The next point in the supply chain is warehousing where inventory is collected, sorted, and processed for distribution. Thus, the various distribution centers can be viewed as TJX production facilities. Although many of TJX retail outlets are leased, many of its distribution centers are owned and located near, or as part of, corporate offices in order to facilitate the centrally controlled decisions on pricing, mark-downs, and inventory replenishment.

In the United States, TJX distribution centers are located in Massachusetts, Indiana, Georgia, North Carolina, Pennsylvania, Nevada, and Arizona. In Canada, they are located in Ontario, and in Europe, they are located in England, Germany, and Poland.

Marketing

The one key success factor for TJX is pricing, as in offering merchandise at least 20 to 60 percent off the prices charged by major retail and specialty department stores. TJX claims it serves a wide spectrum of customers with annual household income from $50,000 to millions of dollars. Given their business model, one area where TJX does save is in advertising and customer service. Customers are encouraged to explore in a “treasure hunt” in its stores, where no walls separate the different departments. Customers roam freely about the open-spaced layout without staff “hovering around,” yet the customers are able to seek assistance from such staff when needed. TJX has a generous return policy. It encourages customers to apply for and obtain a TJX credit card.

TJX marketers work closely with TJX buyers to identify customers’ preferences, and in recent years, they have worked with the product development people to produce its own in-house and licensed brands. TJX’s primary advertising strategy is its stores—a visible and physical representation of its brands. In Europe, especially with the younger generation, TJX engages in TV, radio, and social media advertising, pushing its “tri-branding” campaigns. Starting in 2013, TJX launched www.tjmaxx.com in the United States and www.tkmaxx.com in the United Kingdom and officially entered in e-commerce arena.

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