Small Business Finance - BUSG 1341- Homework-Assignment 6.2 Name 1. You have just completed the first year of operation for your business and have the following information: (50 points) Net sales, $295,000 cost of goods sold are 55% of sales rent, $26,400 interest, $5,000 utilities, $12,000 insurance, $6,600 equipment expense, $4,000 Forecast info: Your forecast indicates that your sales will increase by 20 percent. Your rental agreement provides for a 5 percent increase per year. You read in the paper that utility costs in your area will increase by 8 percent next year. You just received a notice from your insurance company stating your quarterly premium is increasing to $1,800 beginning the first quarter of next year. Your equipment expense will change to $7,000 next year, and the amortization schedule on your current loan indicates that interest expense for next year will be $3,800. a. Using this data, and the table below, construct an actual income statement for this year and a pro forma income statement for next year (round to the nearest dollar). After you have constructed the pro forma income statement answer the questions below. Income Statement for Current and Next Year Actual this Year Pro-forma Next year b. By what percentage did your net income change? Show your work, round answer to 4 decimal places Example 45,69% or 0.4569 What is your current net profit margin and your pro forma net profit margin? Show your work, round answer to 4 decimal places. Example 45.69% or 0.4569 Small Business Finance - BUSG 1341- Homework-Assignment 6.2 Ratio: Current Net Profit Margin: Pro-forma Net Profit Marain: Numbers Used: Answer: d. In your business, assets and liabilities have historically varied with sales. Assets are normally 80 percent of sales, and liabilities are usually 55 percent of sales. You anticipate that you will have no owner payout of net profit. Using the percentage of sales method, determine if any additional financing is needed for your business next year. Show your work. Calculate using 4 decimal places. Numbers Used: Answer: Small Business Finance - BUSG 1341- Homework-Assignment 6.2 2. Your projected sales for next year are as follows: January, $20,000; February, $19,000; and March, $17,000. Based on last year's data, cash sales are 30 percent of total sales for each month. Of the accounts receivable, 60 percent are collected in the month after the sale, and 40 percent are collected in the second month following the sale. Sales for November and December of the current year are $23,000 and $25,000, respectively. You have the following estimated payments: Monthly Accounts Payable are 50% of previous months sales You have monthly operating costs of $4,800, in February you expect them to rise to $5,200 per month. You are preparing your pro forma cash budget for the next quarter. You have the numbers you need from the past November and December. Using the format below, what is your monthly cash budget for January, February, and March? ("Don't worry about the borrowing and repayment section). To get you staged I have filled in some of the data for you. (50 points) Pro Forma Cash Budget Monthly Cash Receipts November 23,000 December 25,000 January February March 6,900 7,500 16,100 17,500 9,660 5,040- 22,200 Sales Current Month Collection at 30% of sales Outstanding Current Month Accounts Receivable 60% of AR Collected month following sale 40% of AR collected 2nd month following sale Total Receipts (Use common sense here! Add current monds cash collections the 60% AR for the month 40% AR for the month) Accounts Payable Operating Expenses Total Payments Total Receipts a. Total Payments Monthly Cash Payments 11,500 4,800 16,300 Monthly Cash Budget 22,200 16,300 5,900 Net Cash Flow Nute Shaded rows-Sales and Outstanding Current Month du not represent cash flow If you keep a minimum cash balance of $5,000 will your company have any borrowing requirements for any month during this three-month period