I am having trouble determining how to to come up with these figures on a pro forma balance sheet.

Running head: ANALYZING PRO FORMA STATEMENTS Analyzing Pro Forma Statements FIN/571 June 2, 2014 Gurpreet Atwal 1 ANALYZING PRO FORMA STATEMENTS 2 Analyzing Pro Forma Statements XYZ Company has decided to expand the business and produce two to three new products this year. They have requested the finance department put together a Pro Forma Statement showing the next five years to help assess any issues that may arise due to the expansion. A Pro Forma Statement is put together to show the company and the investors what the future profits will be and any \"hot spots\" that the company may need to be aware of. The following is a projection of the next five years showing an increase in sales, as a result, of the new products and an increase in production. With the increase of sales, the company was able to acquire fixed assets with the extra cash and they have taken a loan to expand the company. Net Sales will increase from $1,747,698 to $3,070,566 in year five. ANALYZING PRO FORMA STATEMENTS 3 Net sales will double over the first two years then it will continue to increase at 10% in the following years. The cost of revenue is bases on the sales percentage, for example, 60.1%, other operating expense and selling expenses will increase in the same ratio as sales. Also, there is an assumption that the company acquired more property, plant, and equipment because of the expansion. The company feels comfortable with $20,000 as the amount for revolving lines of credit along with $60,500 for the loans payable to stockholders. The company's long-term debt fluctuates over the next five years but does end at a stable number. ANALYZING PRO FORMA STATEMENTS 4 When looking at the Pro Forma Balance Sheet, there is an assumption that current assets and current liabilities have increased in the ratio of sales. There is also an addition of fixed assets in the business. Also, the company as stated before has taken a loan to meet the expansion and the needs of working capital. Overall, expanding the business and producing new products will be good for the company's bottom line. Not only does Net Sales increase over the next five years, but Gross Profit does, and it almost doubles. ANALYZING PRO FORMA STATEMENTS 5 References University of Phoenix, (2014) \"Analyzing Pro Forma Statements\" retrieved from https:/ew classroom3.phoenix.edu/Classroom/#/contextid/OSIRIS:46786434/context/co/view/activi tyDetails/activity/53c06956-87e9-4050-8ecc-15e914705e0/expanded/False/tab/ Instructions Pro-Forma Balance Sheet XYZ Corporation For 2000 to 2005 (all numbers in $000) ASSETS Current Assets Cash Net accounts receivable Inventory Prepaid expenses Total Current Assets Fixed Assets Buildings (net of depreciation) Plant & equipment (net) Vehicles (net) Total Net Fixed Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts payable Current portion of long-term debt Revolving Line of Credit Total Current Liabilities Long-term Liabilities Loans payable to Stockholders Long Term debt and capital leases Total Long-term Liabilities TOTAL LIABILITES SHAREHOLDERS' EQUITY Common Stock Additiaonal Paid-In Capital Retained earnings(Cum from Prior Year) Retained earnings (From Current P&L) Total Shareholders' Equity TOTAL LIABILITIES & EQUITY 2000 2001 2002 2003 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $60,500 $45,500 $106,000 $146,000 $60,500 $60,500 $60,500 $60,500 $60,500 $60,500 $1,000.00 $25,000.00 $53,190 $144,335 $223,525 $369,525 $1,000.00 $25,000.00 $1,000.00 $25,000.00 $1,000.00 $25,000.00 $80,500 $80,500 $80,500 $10,525 $27,000 $30,000 $2,000 $69,525 $215,000 $80,000 $5,000 $300,000 $369,525 $5,000 $15,000 $20,000 $40,000 XYZ Company, INC Profit and Loss Statement Column1 Sales Returns and allowances Net Sales Cost of Sales Beginning Inventory Purchases Production Labor Ending Inventory 2000 $1,750,450.00 $2,752.00 $1,747,698.00 % 100.0% $50,000.00 $610,162.00 $420,108.00 $30,000.00 Total Cost of Sales $1,050,270.00 60.1% $697,428.00 39.9% Selling Expense Wages Commissions Marketing Total Selling Expenses $75,000.00 $25,000.00 $25,000.00 $125,000.00 7.2% Operating Expense Salaries Payroll taxes Benefits Office Supplies Postage Professional Fees Telephone Utilities Training & Education Miscellaneous $225,000.00 $29,000.00 $27,000.00 $500.00 $250.00 $2,000.00 $850.00 $950.00 $250.00 $50.00 Gross Profit Total Operating Expense $285,850.00 16.4% Operating ProfitEBITDA $286,578.00 16.4% Other Income (Expense) Interest Depreciation Amortization -$9,650.00 -$12,000.00 -$2,500.00 Total Other Income (Expense) Total Pre-tax Profit Income Tax Allowance -$24,150.00 $262,428.00 15.0% $118,093.00 Net Profit $144,335.00 8.3% 2001 2002 2004 2005 Column1 Column2 Column3 Column4 Column5 Column6 Column7 Column8 Column9 Column10 Column11 Column12 Column13 Column14 Column15 Column16 Column17 Column18 Column19