Question 1 (21 points) Listen PROFORMA ASSUMPTIONS: Below is the financial statement for 2018 and 2019. Proforma year is 2020. Lululemon Co. expects that sales in 2020 will increase by 13%. The company is planning to expand its operations to new cities in 2020. For the planned expansion, Lululemon Co. received $1,200 additional long-term loan from J.P. Morgan Chase and will use this loan to finance the purchase of a new office building. Salaries are expected be $113 but the market conditions will lead COGS will be 5 percent lower than the 2019 level. When projecting the 2020 balance sheet, Lululemon Co. believed that the accounts receivable days will be 9 days higher than ACP days of 2019. Inventory days and accounts payable amount will remain unchanged from 2019 since the business has recently been rewarded with extended payment terms from its suppliers going forward. Current maturities of long-term debt (CMLTD), minimum cash ratio and dividend payments will remain same as in 2019. Tax rate is 14%. Interest rate for long-term loan in 2020 is projected to be 2%. Interest expense on short term debt is delayed until 2021 (this means apply the interest rate only on long-term debt). Rental expense would be $4 per month. Depreciation expense would be the same percentage of gross fixed assets as was in 2019. With these expectations proforma Net Income will be $844. INCOME STATEMENT Net sales Cost of goods sold Salaries Rental expenses Depr. Expense Interest expense Tax expense Net income (loss) 2018 2019 1,316 1,658 332 673 90 100 26 18 12 30 560 338 48 71 248 428 BALANCE SHEET Cash Accounts receivable Inventory Total Current Assets GFA Accd depre Net fixed assets Total Assets Accounts payable Bank line of credit Current portion due on term loan Total Current Liabilities Long-term debt Total Liabilities Total equity Total Liabilities and Equity 2018 2019 26 20 72 82 85 78 183 180 1,138 1,575 110 140 1,028 1,435 1,211 1,615 39 52 0 225 70 70 109 347 875 805 984 1,152 227 463 1,211 1,615 Question 18 (6 points) Listen BONUS: What is the proforma line of credit (short-term bank loan) in 2020? What is the proforma cash in 2020 ? 23 385 377 366 Question 1 (21 points) Listen PROFORMA ASSUMPTIONS: Below is the financial statement for 2018 and 2019. Proforma year is 2020. Lululemon Co. expects that sales in 2020 will increase by 13%. The company is planning to expand its operations to new cities in 2020. For the planned expansion, Lululemon Co. received $1,200 additional long-term loan from J.P. Morgan Chase and will use this loan to finance the purchase of a new office building. Salaries are expected be $113 but the market conditions will lead COGS will be 5 percent lower than the 2019 level. When projecting the 2020 balance sheet, Lululemon Co. believed that the accounts receivable days will be 9 days higher than ACP days of 2019. Inventory days and accounts payable amount will remain unchanged from 2019 since the business has recently been rewarded with extended payment terms from its suppliers going forward. Current maturities of long-term debt (CMLTD), minimum cash ratio and dividend payments will remain same as in 2019. Tax rate is 14%. Interest rate for long-term loan in 2020 is projected to be 2%. Interest expense on short term debt is delayed until 2021 (this means apply the interest rate only on long-term debt). Rental expense would be $4 per month. Depreciation expense would be the same percentage of gross fixed assets as was in 2019. With these expectations proforma Net Income will be $844. INCOME STATEMENT Net sales Cost of goods sold Salaries Rental expenses Depr. Expense Interest expense Tax expense Net income (loss) 2018 2019 1,316 1,658 332 673 90 100 26 18 12 30 560 338 48 71 248 428 BALANCE SHEET Cash Accounts receivable Inventory Total Current Assets GFA Accd depre Net fixed assets Total Assets Accounts payable Bank line of credit Current portion due on term loan Total Current Liabilities Long-term debt Total Liabilities Total equity Total Liabilities and Equity 2018 2019 26 20 72 82 85 78 183 180 1,138 1,575 110 140 1,028 1,435 1,211 1,615 39 52 0 225 70 70 109 347 875 805 984 1,152 227 463 1,211 1,615 Question 18 (6 points) Listen BONUS: What is the proforma line of credit (short-term bank loan) in 2020? What is the proforma cash in 2020 ? 23 385 377 366
