Case 15: Space-age materials

Question

Now, use the proportional growth (percentage of sales) method to forecast the firms financial statements and EFN for 1993. (Hint: Table 3 has been provided to speed up your work.) Compare the EFN (same as AFN in textbook) given in question 1 with that obtained here (in question 2) from the percentage of sales method.

TABLE 1 Historical Financial Statements (in Millions of Dollars) 1988 s 0.75 2.85 1989 1990 1991 1992 Balance Sheets Cash and securities Accounts receivable Inventories 3.36 4.37 5.46 6.48 Current assets Net fixed assets Total assets S6.008.40 10.92$13.65 $17.71 26.63 $44.34 12.60 $21.00 16.38 $27.30 20.48 $15.00 0.53 0.75 0.54 $34.13 0.65 0.69 $0.29 0.40 2.18 0.84 Accounts payable Notes payable Accrued wages &taxes Current liabilities Long-term debt $2.403.001.82$ 2.272.97 12.57 $11.94 $15.54 7.74 Total liabilities Common stock Retained earnings 9.56 $10.55 37135-372.86-TT339-377.49- 4.88 $17.74 $ 4.51 8.30 $22.19 $14.09 Total liabilities &equity 00002.5034.1344.34 1989 $42.00 35.08 Total common equity $10.49 $28.80 1988 1990 1991 1992 Income Statements: Sales $30.00 25.37 $54.59 45.76 3.28 5.55 $68.25 57.21 $88.73 74.25 Cost of goods sold Depreciation $ 2.834.40 6.94 $ 9.15 Gross profit Taxable income Net income Interest expense 2.40 0.96 S 4.54 S 5.68 2.28 Taxes 3.00 1.50 1.44 2.22 2.723.423.01 Dividends 0.00 0.00 Additions to R.E. Note: because of rounding differences. The figures in the tables were generated using a Lotus model: therefore some numbers may not add up properly TABLE 1 Historical Financial Statements (in Millions of Dollars) 1988 s 0.75 2.85 1989 1990 1991 1992 Balance Sheets Cash and securities Accounts receivable Inventories 3.36 4.37 5.46 6.48 Current assets Net fixed assets Total assets S6.008.40 10.92$13.65 $17.71 26.63 $44.34 12.60 $21.00 16.38 $27.30 20.48 $15.00 0.53 0.75 0.54 $34.13 0.65 0.69 $0.29 0.40 2.18 0.84 Accounts payable Notes payable Accrued wages &taxes Current liabilities Long-term debt $2.403.001.82$ 2.272.97 12.57 $11.94 $15.54 7.74 Total liabilities Common stock Retained earnings 9.56 $10.55 37135-372.86-TT339-377.49- 4.88 $17.74 $ 4.51 8.30 $22.19 $14.09 Total liabilities &equity 00002.5034.1344.34 1989 $42.00 35.08 Total common equity $10.49 $28.80 1988 1990 1991 1992 Income Statements: Sales $30.00 25.37 $54.59 45.76 3.28 5.55 $68.25 57.21 $88.73 74.25 Cost of goods sold Depreciation $ 2.834.40 6.94 $ 9.15 Gross profit Taxable income Net income Interest expense 2.40 0.96 S 4.54 S 5.68 2.28 Taxes 3.00 1.50 1.44 2.22 2.723.423.01 Dividends 0.00 0.00 Additions to R.E. Note: because of rounding differences. The figures in the tables were generated using a Lotus model: therefore some numbers may not add up properly