- Please elaborate what will happen to Net Earnings to Sales and Net Earnings to Total Book Assets when you observe these trends. (a) and (b) are separate unrelated circumstances.
- Sales increased by a total of 30% in the prior three years, while Days of Sales in Inventories increased also by 30% in each of these three years. Costs of Goods Sold to Sales remained constant.
- Gross property, plant and equipment increased by a total of 30% during the prior three years. Operating and administrative expense increased relative to sales by 30% in the prior three years. Sales remained constant. Costs of goods sold to sales remained constant.
- Prepare proforma forecasts of financial statements of Simple, Inc for 2021 and 202 Use the 2020 proforma we discussed in class as guidance. What are the companys forecasted Net Earnings (profit/loss after tax) and additional financing requirements (overdrafts) in 2021 and in 2022?
Simple, Inc. Financial Statements (in $ millions) Fiscal Year Ended Dec. 31 2017 ($) (% sales) 2018 (S) 2019 ($) 2020 Assumptions estimated (% sales) (% sales Past data Income Statement Turnover Cost of sales Gross profit 303.7 127.7 176.0 100.0 42.0 58.0 330.1 130.9 199.2 100.0 39.7 60.3 374.1 149.0 225.1 100.0 13.33% 39.8 % of sales 60.2 mechanical 15% 39.80% 430.2 171.2 259.0 Operating expenses - excluding exceptional ce - exceptional costs Restructuring costs Net interest expense Profit before tax Tax expense Profit/(loss) after tax 151.4 4.5 16.6 0.1 3.4 8.0 (4.6) 49.9 1.5 5.5 0.0 1.1 2.6 -1.5 166.2 0.0 2.7 1.5 28.8 10.4 18.4 50.3 0.0 0.8 0.5 8.7 3.2 5.6 195.7 11.2 1.0 4.4 12.8 3.5 9.3 52.3% of sales 3.0 unusual 0.3 unusual 1.2 interest rate 3.4 mechanical 0.9 =pre-tax tax re 2.5 mechanical 50% 0% 0% 9% 216.4 0 0 5.2 37.4 10.2 27.2 27.34% Ordinary dividends Profit/(loss) retained 10.9 (15.5) 3.6 -5.1 10.9 7.5 3.3 2.3 10.9 (1.6) 2.9 constant -0.4 mechanical 10.9 16.3 8.69% sales growth interest rate, approximate tax rate 13.33% 9.13% 27.34% Fiscal Year Ended Dec. 31 Balance Sheet 2017 ($) 2018 ($) 2019 ($) (% sales) (% sales) (% sales) 34.0 11.2 19.2 5.8 13.7 Assets Cash Excess cash (PLUG) Accounts receivable Inventories Other current assets Net fixed assets Other assets Total assets 27.8 38.6 12.5 87.8 0.0 200.7 9.2 12.7 4.1 28.9 0.0 66.1 30.3 44.7 15.6 104.7 6.0 220.5 9.2 13.5 4.7 31.7 1.8 66.8 30.3 51.3 17.5 110.6 6.7 230.1 3.7 min level PLUG 8.1 DRO 13.7 DSI 4.7 % of sales 29.6% of sales 1.8 % of sales 61.5 mechanical 29.6 125.7 4.68% 29.56% 1.79% 13.7 0 34.8 59.0 20.1 127.2 7.7 262.5 Liabilities and equity Accounts payable Taxes payable Accruals Overdrafts (PLUG) Other current liabilities Long-term liabilities Other liabilities Shareholders' equity Total liabs. and equity 13.0 11.3 10.8 0.0 21.6 28.0 1.7 114.3 200.7 4.3 3.7 3.6 0.0 7.1 9.2 0.6 37.6 66.1 20.5 11.7 15.6 0.3 13.3 36.7 1.0 121.4 220.5 6.2 3.5 4.7 0.1 4.0 11.1 0.3 36.8 66.8 10.7 7.1 11.5 0.7 16.9 61.2 0.4 121.6 230.1 2.9 DPO 26.2 1.9 % of sales 1.90% 3.1% of sales 3.07% 0.2 PLUG 4.5% of sales 4.52% 16.4 DEBT constant 0.1% of sales 0.11% 32.5 =last year's + IS ret earn 61.5 mechanical 12.3 8.2 13.2 9.1 19.4 61.9 0.5 137.9 262.5 difference 9.1 1. Net earnings 2. Overdrafts 27.2 9.1 base case 27.0949 9.3 PLUG OVERDRAFTS TA>TLE TACTLE Simple, Inc. Financial Statements (in $ millions) Fiscal Year Ended Dec. 31 2017 ($) (% sales) 2018 (S) 2019 ($) 2020 Assumptions estimated (% sales) (% sales Past data Income Statement Turnover Cost of sales Gross profit 303.7 127.7 176.0 100.0 42.0 58.0 330.1 130.9 199.2 100.0 39.7 60.3 374.1 149.0 225.1 100.0 13.33% 39.8 % of sales 60.2 mechanical 15% 39.80% 430.2 171.2 259.0 Operating expenses - excluding exceptional ce - exceptional costs Restructuring costs Net interest expense Profit before tax Tax expense Profit/(loss) after tax 151.4 4.5 16.6 0.1 3.4 8.0 (4.6) 49.9 1.5 5.5 0.0 1.1 2.6 -1.5 166.2 0.0 2.7 1.5 28.8 10.4 18.4 50.3 0.0 0.8 0.5 8.7 3.2 5.6 195.7 11.2 1.0 4.4 12.8 3.5 9.3 52.3% of sales 3.0 unusual 0.3 unusual 1.2 interest rate 3.4 mechanical 0.9 =pre-tax tax re 2.5 mechanical 50% 0% 0% 9% 216.4 0 0 5.2 37.4 10.2 27.2 27.34% Ordinary dividends Profit/(loss) retained 10.9 (15.5) 3.6 -5.1 10.9 7.5 3.3 2.3 10.9 (1.6) 2.9 constant -0.4 mechanical 10.9 16.3 8.69% sales growth interest rate, approximate tax rate 13.33% 9.13% 27.34% Fiscal Year Ended Dec. 31 Balance Sheet 2017 ($) 2018 ($) 2019 ($) (% sales) (% sales) (% sales) 34.0 11.2 19.2 5.8 13.7 Assets Cash Excess cash (PLUG) Accounts receivable Inventories Other current assets Net fixed assets Other assets Total assets 27.8 38.6 12.5 87.8 0.0 200.7 9.2 12.7 4.1 28.9 0.0 66.1 30.3 44.7 15.6 104.7 6.0 220.5 9.2 13.5 4.7 31.7 1.8 66.8 30.3 51.3 17.5 110.6 6.7 230.1 3.7 min level PLUG 8.1 DRO 13.7 DSI 4.7 % of sales 29.6% of sales 1.8 % of sales 61.5 mechanical 29.6 125.7 4.68% 29.56% 1.79% 13.7 0 34.8 59.0 20.1 127.2 7.7 262.5 Liabilities and equity Accounts payable Taxes payable Accruals Overdrafts (PLUG) Other current liabilities Long-term liabilities Other liabilities Shareholders' equity Total liabs. and equity 13.0 11.3 10.8 0.0 21.6 28.0 1.7 114.3 200.7 4.3 3.7 3.6 0.0 7.1 9.2 0.6 37.6 66.1 20.5 11.7 15.6 0.3 13.3 36.7 1.0 121.4 220.5 6.2 3.5 4.7 0.1 4.0 11.1 0.3 36.8 66.8 10.7 7.1 11.5 0.7 16.9 61.2 0.4 121.6 230.1 2.9 DPO 26.2 1.9 % of sales 1.90% 3.1% of sales 3.07% 0.2 PLUG 4.5% of sales 4.52% 16.4 DEBT constant 0.1% of sales 0.11% 32.5 =last year's + IS ret earn 61.5 mechanical 12.3 8.2 13.2 9.1 19.4 61.9 0.5 137.9 262.5 difference 9.1 1. Net earnings 2. Overdrafts 27.2 9.1 base case 27.0949 9.3 PLUG OVERDRAFTS TA>TLE TACTLE
