Premium Essay

Analyzing Pro Forma Statements Paper

In: Business and Management

Submitted By gregcur53
Words 851
Pages 4
Analyzing Pro Forma Statements Paper
Gregory Curry
April 22, 2015 CRISTINA MARINE

Analyzing Pro Forma Statements Analyzing Pro Forma Statements

can be used internally or externally to determine how financially stable a company is whether International or within the USA, ratios play a key role in determining how a company is doing financially either for the good or the bad or indifferent. I we will use three common ratios to determine how financially stable from how Shimizu International and Lexmark US based company balance sheets with their business information is doing these last three years. Balance sheets from Shimizu International and Lexmark, companies no matter the industry no company wants a current ratio less than one because this suggests that the company has more liabilities than assets meaning that in the short run they will be more likely not able to pay their debts. This is why “the current ratio is a popular financial ratio used to test a company's liquidity also referred to as its current or working capital position by deriving the proportion of current assets available to cover current liabilities” (Richard Loth, 2015). The figures for both Shimizu International and Lexmark companies will display their current ratios from 2012, 2013 and 2014. It's takes time to convert a company's working capital, in this case Shimizu International and Lexmark assets into cash to pay its current obligations that is the key when looking at their to liquidity. Current ratio can be misleading, this is why having a simplistic and somewhat accurate comparison of these two companies current position will display their weakness when relying on their current ratio as a working capital numbers as…...

Similar Documents

Premium Essay

Analyzing Pro Forma Statement

...Analyzing Pro Forma Statements Kaleah S. Daniels FIN/571 Analyzing Pro Forma Statements Pro forma statements are prepared to forecast financial results that are based on anticipated future projects or events. It is design to show projection of revenues, cash flows deducting the estimated expenses or costs for a particular business plan. Pro forma statements assist financial managers to plan accordingly, in terms of the company’s financial needs. How much financing is needed and when it is needed can be determined by acquiring an estimate of the company’s future balance sheet accounts and income statement. Hence, the purpose of the Pro forma analysis is to forecast the company’s financial statements under a particular condition (Parrino et al., 2012). XYZ Company, INC. is planning for business expansion in the coming years. This paper will discuss and analyze pro forma statements of five year projections created. The company’s income statement displays that the break in the current year occurred when; “Net sales equals $1,747,698, Gross profit equals $697,428 and Total operating expenses equals $285,850” (UOP, 2014). XYZ’s “management expects sales to increase by 10 percent for the coming year. Assuming that the financial statement accounts vary directly with changes in sales and that management has no financing plan at this time” (Parrino, 2012, pg. 613). Using the data from the current statement (income & balance sheet) we are able to calculate, 1)......

Words: 670 - Pages: 3

Premium Essay

Analyzing Pro Forma Statements

...XYZ Company, Inc: Analyzing Pro Forma Statements Karen E. Estremera Pizarro University of Phoenix FIN/571 - Foundations of Corporate Finance June 23, 2014 Prof. Victor Mojica – Rivera Analyzing Pro Forma Statements Pro Forma Statements are financial statements that a company prepares to consider the effects of potential activity (Pro Forma Statement, 2013). It is a financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows ((Parrino, Kidwell, and Bates, 2012). The XYZ Company, Inc. is looking to increase the sales in the next five years with the introduction of a new product in their organization. The following paper will review XYZ Company’s five-year financial plan to grow the organization. To achieve the company growth the strategy is introduce a new product and maximize capacity. Through increased sale, we will be getting fixed assets with the excess cash and will be taking loan if is necessary to cover any additional costs arise or are not sufficiently measured. Below in Figure 1-1, the pro forma income statement shows a 12% increase in gross sales for the year 2014 and 11 % in the next five-years. Therefore, in same proportion have been estimated the increase in the cost of sales, then other operating expenses and selling expenses will increase in the same ratio of sales. The increase in cost of sales are the purchases of raw...

Words: 789 - Pages: 4

Premium Essay

Analyzing Proforma

...Analyzing Pro Forma Statements FIN 571 September 11, 2014 Introduction This paper is the analysis of pro forma financial statements. Pro forma statements are forecasted or projected financial statements as a result of financial planning. The financial statements are based on the inputs and assumptions such as percent of sales model in which most of the entries vary directly with the level of sales. The attached excel spreadsheet includes pro forma statements for the next five years. This company decided to invest in the purchase of new equipment to help increase sales. The resulting projections are the focus of this paper. Analysis of pro forma statements will determine if the company requires any external financing to support its planned initiatives. Assumptions supporting each line for forecasted statements This paper covers a five year plan with the basic assumptions for the pro forma statements that the equipment purchase initiative will increase sales by 12% for the first two years, and then 5% for the next three years. The cost of sales including purchases, production and labor, and ending inventory will vary with sales, while beginning inventory comes from prior year ending inventory. Depreciation will increase by $40K for the additional equipment in year one. Fixed assets will not vary from year to year, except for $200K increase in equipment expected in the first year to support sales growth. Retained earnings for the prior year comes from previous year, and...

Words: 696 - Pages: 3

Premium Essay

O.M Scott & Sons Case

...A Case Study on O.M Scott & Sons Co. Table of Contents Objective……………………………………………………….…………1 Company Background……………………………………………………1 Ratio Analysis…………………………………………………………….1 Pro Forma Analysis……………………………………………………….3 Sensitivity Analysis……………………………………………………….3 Recommendations for Management………………………………………4 Summary of Case Study…………………………………………………..4 Appendix………………………………………………………………….5 Objective This paper will seek to analyze the financial statements of the O.M Scott & Sons Company during the years 1957-1961, in order to provide readers with a thorough understanding of the various factors that may influence the future success of this business. Additionally, recommendations based on an analysis of their financial statements will be offered for the management of O.M Scott & Sons to implement in the following years. Company Background Headquartered in Ohio, the O.M Scott & Sons Company has operated in the lawn care industry since 1868 and has grown into a successful business with a positive outlook. In fact, management within the company set an ambitious goal of increasing annual growth rate in sales and profits to 25% in the year 1959. According to management, one of the main factors limiting O.M Scott & Sons companies’ growth was the inability for their dealers to carry a sufficient amount of stock for customers. However, company officials feel that their use of a trust receipt program and other decisions will benefit the company’s current......

Words: 1551 - Pages: 7

Premium Essay

You Are an Entrepreneur

...sources of revenue, and expenditures that you expect to incur to earn those revenues. You may build a detailed chart that includes business units, divisions, product lines, etc.) 2. Based on the form of your business, analyze whether or not you will be required to use Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) accounting methods and how the IFRS / GAAP convergence will impact your business. Suggest how you will incorporate any changes into your books and records. (Note: You need to demonstrate to the lender/investor that you have recognized possible changes to GAAP that may impact the accounting and reporting of your accounting events.) 3. Prepare a pro forma balance sheet and income statement providing the assumptions made and support the valuations assigned. 4. Considering the value of assets (assigned per your balance sheet) used within your business, recommend two (2) specific internal controls that you will implement to protect your company’s assets and resources, justifying how each will provide assurances to management. (NOTE:  Safeguarding assets and protecting personal data are paramount to ensuring the viability of a business.  Demonstrate to the lender/investor that your assets will be safeguarded and customer information (if applicable) will be protected.) 5. Based on the internal control recommendations that you made, suggest how you will implement each within your business......

Words: 2310 - Pages: 10

Free Essay

Forensic Accounting in Practice

...Assignment #3 Forensic Accounting in Practice Professor Demetrius Carolina, Sr. Bus 508-Contemporary Business February 16, 2013 The purpose of my paper is to explore Forensic Accounting and the many aspects surrounding the field. I will determine the skills necessary to be a forensic accountant and its application to business operations. I will also describe the role the forensic accountant plays in a courtroom environment and the role played by the forensic accountant in the litigation process. I will also provide case examples where forensic accountants are used and have provided vital evidence in the case. Today, forensic accounting is a rapidly growing segment of the accounting practice, and the current demand for forensic accountants far outstrips the current supply. Determine the most important five (5) skills that a forensic accountant needs to possess and evaluate the need for each skill. Be sure to include discussion regarding the relationship between the skill and its application to business operations. Have you ever been cheated, robbed or financially hurt by actions of others? Well, out of those feelings civil lawsuits arise based on the desire to reclaim what one perceives he/she has lost unjustly. Financial loss isn’t always easy to define or measure. So, the important task of investigating and quantifying the financial loss normally requires the expertise of a forensic accountant. A forensic accountant is a professional who uses a......

Words: 2645 - Pages: 11

Free Essay

Fin/571 Syllabus

...Community. Objectives/Competencies Foundations of Finance 1.1Differentiate between financial statements. 1.2Differentiate between legal and tax structures for businesses. 1.3Identify the axioms of finance. Learning Activities Required Reading WileyPLUS Assignment: Fundamentals of Corporate Finance, Ch. 1 48 Reading WileyPLUS Assignment: Fundamentals of Corporate Finance, Ch. 2 25 Reading WileyPLUS Assignment: Fundamentals of Corporate Finance, Ch. 3 27 Website WileyPLUS Gradebook: Week 1 Gradebook ERR Week 1 Electronic Reserve Videos Recommended Reading Fundamentals of Corporate Finance, 2e Interactive/Tutorial WileyPLUS Assignment: Week 1 Vocabulary Activity 14 Interactive/Tutorial WileyPLUS Assignment: Week 1 Interactive Tutorials Activity Interactive/Tutorial WileyPLUS Read, Study & Practice: Week 1 Practice Interactive/Tutorial WileyPLUS Assignment: Week 1 Excel Resources Activity Video WileyPLUS Assignment: Week 1 Videos Activity 21 Assignments ASSIGNMENT STATUS FRIENDLY NAME TITLE DUE DATE POINTS UNREAD COMMENTS Participation Week 1 Participation Quiz WileyPLUS Assignment: Week 1 Practice Quiz Paper Business Structures Week2. Financial Statement Analysis. Jan 20 - Jan 26Week2 Financial Statement Analysis Jan 20 - Jan 26 12.6 / 13 points Tasks Review the Week 2 Study Guide. Objectives/Competencies Financial Statement Analysis 2.1Calculate financial ratios. 2.2Interpret financial ratio results......

Words: 1170 - Pages: 5

Premium Essay

Guillermo Furniture Store Guillermo’s is the largest furniture store in the area and made furniture for years, until the late 1990s that a new competitors joined the furniture business that has put a dent into Guillermo’s business. Competitors have new technology when to allow them to come in with lower prices and lure customers but Guillermo has to decide on the best options for the company either upgrade or move forward working as he did making quality products for customer’s expectation. In order for Guillermo to improve his company, Guillermo has to seek other alternatives and make financial decisions to increase sales to make profits. The contents of the paper will examining Sensitivity Analysis, Weighted Average Cost of Capital (WACC), multiple valuation techniques in reducing risks, calculate NPV for future cash flows and work out pro forma cash flow budget for the next five years for the organization and analyze the companies projected earnings (UOP, 2009). Analysis of Different Alternatives Guillermo has three available alternatives to evaluate the furniture store. First alternative is to keep itself in the current position. The current managers use capital budgeting techniques to find the best project among the group of projects. Current budget for Guillermo is $42,577 net income before taxes could observe capital markets for just a short time to convince consumer the market rates are not at a constant. Guillermo has to pay his laborer the amount of $20 to $30 an......

Words: 2168 - Pages: 9

Premium Essay


...1986, his sales had reached $33 million dollars. This paper will examine Dell Inc., their financial ratios and plans for the future and whether it is a reasonable choice for potential investors. The company that was started in a dorm room in Texas, grew fast, but Mr. Dell soon realized there was areas lacking that would be needed if he were to achieve his goal, which to become one of the top 3 PC companies in the world (, 1999). During the next several years, however, PCs Ltd. was hampered by a lack of money, people, and resources. Michael Dell sought to refine the company's business model, add needed production capacity, and build a bigger, deeper management staff and corporate infrastructure while at the same time keeping costs low. The company was renamed Dell Computer in 1987, and the first international offices were opened that same year. In 1988 Dell added a sales force to serve large customers, began selling to government agencies, and became a public company—raising $34.2 million in its first offering of common stock. Sales to large customers quickly became the dominant part of Dell's business. By 1990 Dell Computer had sales of $388 million, a market share of 2-3 percent, and an R&D staff of over 150 people. Michael Dell's vision was for Dell Computer to become one of the top three PC companies was coming to fruition. To begin the analysis of Dell Inc., we need to analyze their financial statements to ascertain their current financial position. The......

Words: 4648 - Pages: 19

Premium Essay

Reporting Practices and Ethical Standards

...Reporting Practices and Ethics Paper Financial reporting and the ethical standards that coincide are important aspects of any health care organization. Health care facilities must report financial statements accurately and fairly. Reported financial data has a huge impact on stakeholders such as investors, patients, vendors, and employees. Health care finance managers should be well versed in the four elements of financial management, generally accepted accounting principles (GAAP), and ethical financial standards to ensure acceptable financial practices as well as the sustainability of the organization. Four Elements of Financial Management During the planning process, a financial manager uses the organization’s objectives to develop a systematic process by which the objectives will be met. In order for health care facilities to be successful, there is a large amount of planning involved. Of particular concern is healthcare reform. A health care facility has to plan for compliance issues that will directly affect their bottom line. This includes risk management, new information systems, or the purchase of new equipment. Controlling ensures each department within the health care facility is following prudent financial decisions that have already been set and planned. One example of controlling expenses is to approve or deny capital expenditures. Capital expenditures more often than not increase the organization’s assets. Capital expenditures are also usually......

Words: 814 - Pages: 4

Free Essay

Business Plan * Arranging new sources of finance for a company's debt facilities | Operations Manager | * Coordinate, manage and monitor the workings of various departments in the organization * Manage customer support * Plan and support sales and marketing activities | Production Supervisor | * Developing personal growth opportunities * Maintains quality service by establishing and enforcing organization standards * Maintains working relationship with the union by following the terms of the collective bargaining agreement | Secretary | * Maintain databases * Manage office supplies * Maintain schedules and calendars | | | Accountant | * Prepares asset, liability, and capital account entries by compiling and analyzing account information * Documents financial transactions by entering account information | Table 6.4 6.5 Remuneration plan For our company, we have chosen the EPF scheme to given to all employees. EPF is a compulsory savings for employees so that they will have money to support themselves once they retire. As a general guideline, employers are required to contribute at least 12% of an employee’s basic salary. Fa Fa Furniture also provides Social Security Organization (SOSCO) contributions to ensure that employees receive compensation in situation of work-related accidents or illnesses. Table 6.5 illustrates the remuneration plan for each employee in Fa Fa Furniture. Position | Number Of Employees | Remuneration per......

Words: 5413 - Pages: 22

Premium Essay

Software Develop such as Coca-Cola wouldn't be nearly as successful were it not for the high value obtained through its brand-name recognition. Although brand recognition is not a physical asset you can see or touch, its positive effects on bottom-line profits can prove extremely valuable to firms such as Coca-Cola, whose brand strength drives global sales year after year. Long-Term Loans and financial obligations lasting over one year. In the U.K., long-term debts are known as "long-term loans." Investopedia explains Long-Term Debt For example, debts obligations such as bonds and notes, which have maturities greater than one year, would be considered long-term debt. Other securities such as T-bills and commercial papers would not be long-term debt because their maturities are typically shorter than one year. Debt Ratio A ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load. [pic] Investopedia explains Debt Ratio A debt ratio of greater than 1 indicates that a company has more debt than assets, meanwhile, a debt ratio of less than 1 indicates that a company has more assets than debt. Used in conjunction with other measures of financial health, the debt ratio can help investors determine a company's level of risk. Leverage 1. The use of various financial......

Words: 6462 - Pages: 26

Premium Essay

Cases in Financial Management James A. Gentry [WEB] • Analysis for Financial Management, 8th Edition, by Robert C. Higgins, McGraw-Hill/Irwin, 2007. • Estimating The Intrinsic Value of a Real Company With An Integrated Financial System: A Live Case, January 2009, by James A. Gentry and Frank K. Reilly. [Exhibit 25 WEB]; IV. SYLLABUS FOR FIN 522 Spring 2009 A. Exhibits related to assignments: • Exhibit 1. Cash Flow Statement • Exhibit 2. The Cash Flow Cycle • Exhibit 3. The Cash Conversion Cycle • Exhibit 4. Dupont System • Exhibit 5 Gentry’s Key Financial Ratios • Exhibit 6 Moody’s User’s Guide • Exhibit 7 Moody’s Key Ratios for Comparison • Exhibit 8 Porter’s Five Competitive Forces • Exhibit 9. Micro-Drive Balance Sheet • Exhibit 10. Micro-Drive Income Statement • Exhibit 11. Micro-Drive Summary Sheet • Exhibit 12. AFN-Financial Forecast • Exhibit 13. Cash Budget • Exhibit 14. Dell’s Pro-forma Balance Sheet • Exhibit 15. Dell’s Pro-forma Income Statement • Exhibit 16 Credit Risk Premiums • Exhibit 17 Equity Premiums • Exhibit 18. DuPont’s Bond Rating: Is it optimal? • Exhibit 19. Moody’s Corporate Default and Recovery Rates 1920-2008 • Exhibit 20. Estimating the Probability of Default • Exhibit 21. Moody’s Speculative Grade Liquidity Ratings Sept. 2002 • Exhibit 22. Moody’s Market Implied Ratings Description… • Exhibit 23.......

Words: 5389 - Pages: 22

Premium Essay


...condition of an organization is identified through data provided in formal records called financial statements. Financial statements provide an accurate account of a company’s financial position and cash flow of the business. Stakeholders used the data to make decisions regarding future purchases, investments, and profitability of the organization. Analyzing financial statements consists of using various methods (statistical tools) including comparative statements, schedule of changes in working capital, common size percentages (analysis), fund analysis, trend analysis, and ratio analysis. The purpose of this paper is to review the financial statements of one domestic, and one global organization from the Financial Times 500. The two companies for review are the McDonald’s and Samsung organizations. The data provided in the financial statements will convert into a ratio analysis. Common size analysis, and accounting analysis limitations are tools for review. The pros and cons of each of these statistical tools will also be discussed. To understand the importance of statistical tools, a review of ratio analysis, common size analysis, and accounting analysis limitation will be the starting point for this paper. Ratio Analysis Ratio analysis is the most powerful tool of financial analysis (Accounting for Management, 2012, para. 1) used to evaluate the significance of financial statement data. Ratio analysis is the calculation and comparison of ratios used to monitor and......

Words: 2386 - Pages: 10

Premium Essay

Supply Chain

...key skill set for today's business executive. This course focuses on supply chain and distribution channel decisions within a global environment. The Marketplace Business Fundamentals simulation will provide you with the opportunity to apply, in a setting that simulates a real-world environment, a variety of business decisions that must be made when managing a business as a component of a supply chain. Watch the following video for an introduction to this course: Note: View the video in full screen at 720p for best results. Competencies This course provides guidance to help you demonstrate the following 10 competencies: * Competency 326.1.5: Budgets The graduate utilizes budgets and a variety of pro-forma statements for planning and control purposes including analyzing cash flows to assure adequacy of funds for capitalizing on business opportunities. * Competency 327.3.1: Continuous Improvement and Quality Management The graduate applies quality management methods for continuous improvement and proposes various quality improvements in an organization. * Competency 329.4.1: Operational Design The graduate designs capacity, process, layout, and location strategies. * Competency 329.4.3: Operating Efficiency The graduate employs just-in-time, lean systems and constraint management concepts and scheduling methods to improve operating efficiency. * Competency 329.4.5: Requirements Planning The graduate applies operations and requirements planning and......

Words: 3135 - Pages: 13