The file is attached with questions that I need help with . Please let me know if you are able to help

Company Projectpart 2 Select one firm of: Advance Auto Parts, Footlocker, Pier 1 Imports and The Gap for this assignment. Use the most recent annual financial statements (provided below). You are also welcome to use other information about the firm. Hand in copies of the parts of the financial statements and other information that you use to do the assignment. For each part of the project, list which firm you used at the top of the first page. That also simplifies grading. Show and explain how you calculated each item. You can do that on another sheet. Remember when I grade the projects, the only information that I have is what you include so if you do not explain how you came up with a number it is hard for me to guess. If there is insufficient information to assess your answer, I may have to assume that you did not do a step correctly. For many questions there is no one right answer, so do not worry excessively about your exact numbers, such as the forecast for revenues. Focus on doing sensible things and explaining what you did. Follow, as much as possible, the steps we used in class and if you do things in an alternative way (which is fine) also do it the way we did it in class. Remember you are not allowed to work with other people on the project. This part of the project is the first of two parts related to projecting the financial statements for the firm for next year. Project 3 will build on the work you do in this part so keep a copy of this assignment so you have the numbers necessary for part 3. 1. Project revenues for the next year. For this and questions 2, 3 and 4 provide an answer in dollars. Discuss how you came up with your forecast of revenues. Do not simply assume that revenues grow at the same rate as this year unless you discuss reasons why you expect no change in the growth rate of revenues. As part of your answer discuss 1) the firm's business model (such as what they sell and how) and 2) at least three factors that may affect revenue growth. For a retailer or restaurant you should discuss the role of comparable store sales growth and the number of retail locations in revenue growth. 2. Project cost of goods sold for next year for the firm using your forecast for revenues and an assumption on the projected ratio of the cost of goods sold to revenue ratio. If you use a different approach to project cost of goods sold you should also use this approach, which we discussed in class. Do not simply project based on trends. Discuss information about the firm's operations and operating environment that help make the forecast. One source of useful information is Management Discussion and Analysis. As part of your answer report the current cost of goods sold to revenue ratio. 3. Project inventories for the firm. Use a projected inventory turnover ratio to generate your projection. Explain how you came up with your forecast. 4. Project property, plant and equipment for the firm for next year using two different methods. Specifically, a) Assume that the fixed asset turnover ratio remains the same. b) Make reasonable estimates for capital expenditures and depreciation to produce an estimate for net PPE for next year. Describe briefly how you came up with the forecasts for capital expenditures and depreciation. 5. Is this company the sort of company that will probably have to raise external funds in order to operate in the next year or is the sort of company that will have additional funds generated from operations that it will be able to allocate to cash, short term investments, repurchasing debt, repurchasing stock and paying dividends? Use evidence from the cash flow statement to answer this question. Explain how you reached the conclusion. If it needs to raise external funds, how do you think it will raise the additional money? If it will probably have additional funds generated by its operations, how do you think it will use the money? Use information on what it has done in the past and from its discussion of liquidity in MD&A to develop your answer. Explain your answer. Company Websites Advance Auto Parts http://phx.corporate-ir.net/phoenix.zhtml?c=130560&p=irol-reportsannual Footlocker http://www.footlocker-inc.com/investors.cfm?page=annual-reports Pier 1 Imports http://www.pier1.com/ir_annual-report.html The Gap http://www.gapinc.com/content/dam/gapincsite/documents/GPS%202015%20Annual %20Report.pdf Question 1. Pier 1 Imports revenues in the year 2016, were $1,892,230. My forecast is that the company will have a modest growth rate of about 4% bringing their 2017 revenue to $ 1,967919, that is, 1.04*$1,892,230 =$ 1,967919. Being a global company, it is able to sell more than 6,000 items that are imported from more than 50 counties through more than 1,070 Pier Imports stores across North America. Its stores offer a wide selection of indoor and outdoor furniture, lamps, vases, baskets, ceramics, dinnerware, candles, and other decorative accessories. In addition to physical stores they also have online platform Pier 1 To-Go which allows shoppers to order and reserve items online for pickup and payment in its stores as well as delivery service. In addition, the company supplies merchandise to more than 55 stores in Mexico owned by Grupo Sanborns. After a rough patch in the 2000s, and also in 2008 Pier 1 has bounced back and steadily making profits again after 6 years of decline profit. However there are other factors affecting their revenue and also growth. The three factors that may likely to affect their revenue includes are not limited to; i. Decrease in their Sales and administrative expenses which contributed to lower percentage in sales in the year 2016. For example, these expenses were $578.8 million in the fiscal 2016, compared to $594.9 million in fiscal 2015, a decrease of ii. $16.1 million. The profitability of the product sales as well as the profitability of service sales increased over the two years leading to improved revenues. iii. Conducive environment, both political and economic environment were conducive there were minimal government interventions in terms of high taxes as well as the minimal inflation rate Question 2. The cost of goods sold (COGS) for the year 2016 was about 1.24Billion us dollars. Therefore, using the forecast for revenues and an assumption on the projected ratio of the cost of goods sold to revenue ratio, where the cost of goods sold are expected to grow with the same rate of 4% as the revenues, then it follows that the COGS will be 1.04* 1.24 = $1.2896 billion in the year 2017 as the forecast. Cost of goods sold to revenue ratio = 1.9676/1.2896 =1. 5257 This means that the operation efficiency of the firm is accepted since more revenue is earned for every unit of expenses incurred. In order to earn higher revenue, the firm will have to commit more cost resources, which may not have an immediate effect on the improvement of the operation efficiency. Question 3. The Project inventories for the firm using the projected inventory turnover ratio Inventory turnover ratio measures how fast the firm is selling its inventory and is generally compared against industry averages. A low turnover will mean that there is a weak sales and, therefore, excess inventory while a high ratio will either strong sales. Inventory turnover ratio = cost of sales / inventory = 1.24/0.40586 = 3.055 Therefore, the Inventory turnover ratio for the year 2016 will be 3.055 which implies that the firm marketing department has strong sales effort they are putting. Using this, the projected inventory for year 2017 will be given by; Cost of sales/inventory turnover ratio = $1.2896 billion/3.055 = 422 million dollars. This shows that the inventory has increased to 422 million from the year 2016, which was $405.86 million. Question 4. Projection of the property, plant and equipment for the firm for next year using two different methods. a) Assume that the fixed asset turnover ratio remains the same. Fixed asset turnover ratio (2016) = fixed asset/ sales = 0.2443/1.89 =0.1293 This shows how effectively the firm uses its PPE relative to operating levels. Therefore, the projected PPE for the year 2017 will be given by; PPE = sales * FA ratio = $ 1,967919 *0.1293 = $2,443,785.9 Question 5. This may be determined by calculating the liquidity ratios so as to determine whether the firm has the ability to meet the short term obligation when they fall due or not. i. Current asset ratio = current assets/current liabilities = 574.89M/246.69M = 2.33 This implies that the firm's liquidity position is very strong, thus can be able to meet the short term obligations when they fall due. ii. Quick ratio = current assets - inventory/current liabilities = (574.89M - 405.86M)/246.69M = 0.685 This ratios shows the ability of the firm to repay the short term obligations without selling the inventory. Debt management ratios Can also be used to know whether the firm needs funding or not. These ratios shows the extent to which the firm uses debt financing. i. Debt ratio = total debt/total assets This measures the percentage of funds provided by creditors = 534.43M/819.19M = 0.6532 or 65.32% It implies that more than half of the all the firm's funds have been provided by the creditors. Therefore, with the above ratio analysis, the firm does not need external funding since; a. It is able to meet the short term obligations when they fall due with not having to sell the inventory. b. Already the company funds are provided by the creditors hence further funding will be disastrous to the company. May lead to insolvency if not checked. Question 4 (b) Most companies have a stable relationship between the sales level and the amount of the plant, property, and equipment (PPE), net of depreciation that they report. We calculate the ratio of PPE to sales for the year 2016 and find the average. Multiply this ratio by the growth in sales dollars the company has achieved in the current year. Net PPE to sales ratio (2016) = Net PPE/Sales or revenue = 0.20763B/ 1.89B = 0.1099 Hence, Net PPE (2017) = sales (2017) * Net PPE to sales ratio = 1967.68 * 0.1099 = 216.16 million. Net depreciation to sales ratio (2016) = Net Depreciation/sales = 55.83M/ 1890 M = 2.954% Therefore, Net Depreciation (2017) = sales (2017) * Net depreciation sales ratio = 1967.68 * 2.954% = 58.125 Million. Question 1. Pier 1 Imports revenues in the year 2016, were $1,892,230. My forecast is that the company will have a modest growth rate of about 4% bringing their 2017 revenue to $ 1,967919, that is, 1.04*$1,892,230 =$ 1,967919. Being a global company, it is able to sell more than 6,000 items that are imported from more than 50 counties through more than 1,070 Pier Imports stores across North America. Its stores offer a wide selection of indoor and outdoor furniture, lamps, vases, baskets, ceramics, dinnerware, candles, and other decorative accessories. In addition to physical stores they also have online platform Pier 1 To-Go which allows shoppers to order and reserve items online for pickup and payment in its stores as well as delivery service. In addition, the company supplies merchandise to more than 55 stores in Mexico owned by Grupo Sanborns. After a rough patch in the 2000s, and also in 2008 Pier 1 has bounced back and steadily making profits again after 6 years of decline profit. However there are other factors affecting their revenue and also growth. The three factors that may likely to affect their revenue includes are not limited to; i. Decrease in their Sales and administrative expenses which contributed to lower percentage in sales in the year 2016. For example, these expenses were $578.8 million in the fiscal 2016, compared to $594.9 million in fiscal 2015, a decrease of ii. $16.1 million. The profitability of the product sales as well as the profitability of service sales increased over the two years leading to improved revenues. iii. Conducive environment, both political and economic environment were conducive there were minimal government interventions in terms of high taxes as well as the minimal inflation rate Question 2. The cost of goods sold (COGS) for the year 2016 was about 1.24Billion us dollars. Therefore, using the forecast for revenues and an assumption on the projected ratio of the cost of goods sold to revenue ratio, where the cost of goods sold are expected to grow with the same rate of 4% as the revenues, then it follows that the COGS will be 1.04* 1.24 = $1.2896 billion in the year 2017 as the forecast. Cost of goods sold to revenue ratio = 1.9676/1.2896 =1. 5257 This means that the operation efficiency of the firm is accepted since more revenue is earned for every unit of expenses incurred. In order to earn higher revenue, the firm will have to commit more cost resources, which may not have an immediate effect on the improvement of the operation efficiency. Question 3. The Project inventories for the firm using the projected inventory turnover ratio Inventory turnover ratio measures how fast the firm is selling its inventory and is generally compared against industry averages. A low turnover will mean that there is a weak sales and, therefore, excess inventory while a high ratio will either strong sales. Inventory turnover ratio = cost of sales / inventory = 1.24/0.40586 = 3.055 Therefore, the Inventory turnover ratio for the year 2016 will be 3.055 which implies that the firm marketing department has strong sales effort they are putting. Using this, the projected inventory for year 2017 will be given by; Cost of sales/inventory turnover ratio = $1.2896 billion/3.055 = 422 million dollars. This shows that the inventory has increased to 422 million from the year 2016, which was $405.86 million. Question 4. Projection of the property, plant and equipment for the firm for next year using two different methods. a) Assume that the fixed asset turnover ratio remains the same. Fixed asset turnover ratio (2016) = fixed asset/ sales = 0.2443/1.89 =0.1293 This shows how effectively the firm uses its PPE relative to operating levels. Therefore, the projected PPE for the year 2017 will be given by; PPE = sales * FA ratio = $ 1,967919 *0.1293 = $2,443,785.9 Question 5. This may be determined by calculating the liquidity ratios so as to determine whether the firm has the ability to meet the short term obligation when they fall due or not. i. Current asset ratio = current assets/current liabilities = 574.89M/246.69M = 2.33 This implies that the firm's liquidity position is very strong, thus can be able to meet the short term obligations when they fall due. ii. Quick ratio = current assets - inventory/current liabilities = (574.89M - 405.86M)/246.69M = 0.685 This ratios shows the ability of the firm to repay the short term obligations without selling the inventory. Debt management ratios Can also be used to know whether the firm needs funding or not. These ratios shows the extent to which the firm uses debt financing. i. Debt ratio = total debt/total assets This measures the percentage of funds provided by creditors = 534.43M/819.19M = 0.6532 or 65.32% It implies that more than half of the all the firm's funds have been provided by the creditors. Therefore, with the above ratio analysis, the firm does not need external funding since; a. It is able to meet the short term obligations when they fall due with not having to sell the inventory. b. Already the company funds are provided by the creditors hence further funding will be disastrous to the company. May lead to insolvency if not checked. Question 4 (b) Most companies have a stable relationship between the sales level and the amount of the plant, property, and equipment (PPE), net of depreciation that they report. We calculate the ratio of PPE to sales for the year 2016 and find the average. Multiply this ratio by the growth in sales dollars the company has achieved in the current year. Net PPE to sales ratio (2016) = Net PPE/Sales or revenue = 0.20763B/ 1.89B = 0.1099 Hence, Net PPE (2017) = sales (2017) * Net PPE to sales ratio = 1967.68 * 0.1099 = 216.16 million. Net depreciation to sales ratio (2016) = Net Depreciation/sales = 55.83M/ 1890 M = 2.954% Therefore, Net Depreciation (2017) = sales (2017) * Net depreciation sales ratio = 1967.68 * 2.954% = 58.125 Million