analyze the growth of spencer sporting goofs in 2018. In your analysis, explain how spencer is coping with their relative level of sales growth

1. You did a consuiting job for Spencer Sporting Goods at the beginning of the semester When his company was running low on cash. He made a number of changes based on your recommendations to improve his profitability given how he was paying his suppliers, In order to do this, however, he needed a sizeable loan from the bank. As you can see on the next page (all numbers in thousands), the notes payable from the bank increased from $120,000 to $5.1 million. The bank, however, told Spencer that the had to reduce his loan balance over the next year. To generate more cash, he is planning on making the following changes to his business: He wal be eliminating some of his slower-selling inventory. As a result, he expects inventory turnover to be 12 in 2018 . He wirl be collecting from hils customers more quickly. He thinks that the collection penod will be 50 in 2018 . He will be raising his prices by 5% each year. He expects his gross margins to increase to 22% in 2018 . As a resutt of the above decisions, he also expects revenue growth to be fust 25% in 2018 As a result of the above decisions, he also expects revenue growth to be just 25% in 2018 . His payables perlod will be 10 days next year to take advantage of all discounts from suppliers. These discounts are already refected in the gross margin estimates above. He will be more efficient with his marketing expenses. He expects operating, selling, and administrative expenses to be 13% of revenues in 2018. He is rellant on the dividends from his business to maintain his lifestyle, so he will maintain the same dividend payout ratio of 50% next year. He will also NOT contribute any additional capital stock to his company. The tax rate for the firm is 40% He has already -magically forecasted the expected interest expense next year. (this is necessary for you to solve the problem... normally, this would have to be dependent on the expected interest-bearing debt, which is notes payable here) The cash balance forecasted assumes no excess cash. (continuation of the problem) Analyze the growth of Spencer Sporting Goods in 2018. In your analysis, explain how Spencer is coping with their relative level of sales growth. (10 pts) \begin{tabular}{|c|c|c|c|} \hline \multirow[t]{2}{*}{ Balance Shcet } & \multicolumn{2}{|c|}{ Historical } & \multirow{2}{*}{\begin{tabular}{c} Pro-Forma \\ 2018 \end{tabular}} \\ \hline & 2016 & 2017 & \\ \hline Cash & 45 & 150 & 150 \\ \hline Accounts receivabls, nct & 3,588 & 4.734 & \\ \hline Inventory & 1.782 & 2,362 & \\ \hline Total curreat assets & 5,415 & 7.246 & \\ \hline Fhod assets net & 225 & 300 & 360 \\ \hline Defered charges & 93 & 150 & 195 \\ \hline Other assets & 177 & 255 & 300 \\ \hline Total assets & 5,910 & 7,951 & \\ \hline Notes payable, bank & 120 & 5.099 & \\ \hline Accounts payable & 3.831 & 647 & \\ \hline Miscelloneous accruals. & 270 & 300 & 360 \\ \hline Total current thablities & 4.221 & 6,046 & \\ \hline Capital stock & 1.125 & 1.125 & \\ \hline Retained carnings & 564 & 779 & \\ \hline Total liabilines and owners' cquiry & 5,910 & 7.951 & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline \multirow{3}{*}{ Income statement } & \multirow{2}{*}{\multicolumn{2}{|c|}{ Historical }} & \multirow{3}{*}{\begin{tabular}{c} Pro-Forina \\ 2018 \end{tabular}} \\ \hline & & & \\ \hline & 2016 & 2017 & \\ \hline Net sales. & 21.591 & 28,800 & \\ \hline Cost of eoods sold & 18.081 & 23,616 & \\ \hline Gross profit & 3,510 & 5,184 & \\ \hline \multicolumn{4}{|l|}{ Opcrating, selling and } \\ \hline administrative expense. & 3,015 & 4,032 & \\ \hline laterest eqpense. & 9 & 382 & 300 \\ \hline Profit before taxes & 486 & 770 & \\ \hline Iacome taxes & 216 & 340 & \\ \hline Profit affer taxes & 270 & 430 & \\ \hline Divilends paid & 135 & 215 & \\ \hline \end{tabular}