Question

At the most recent strategic planning meeting, the board of directors of your company has voted to issue additional stock to raise capital for major expansions for the company in the next five years. The board is considering $5 billion. Take the 2017 financial statements and prepare a set of projected financial statements based on the given assumptions. The CEO requests that you prepare a written report (including the financial statements) for her.

A. Generate a projected income statement based on the given scenario.

B. Analyze the impact on the income statement based on the given scenario.

C. Generate a projected statement of retained earnings based on the given scenario.

D. Analyze the impact on the statement of retained earnings based on the given scenario.

E. Generate a projected balance sheet based on the given scenario.

F. Analyze the impact on the balance sheet based on the given scenario.

G. Generate a projected cash flow statement based on the given scenario.

H. Analyze the impact on the cash flow statement based on the given scenario

Income statements (value in 000's)

	Period Ending	1/28/2017	1/30/2016
Total Revenue		$69,495,000	$73,785,000
Cost of Revenue		$48,872,000	$51,997,000
Gross Profit		$20,623,000	$21,788,000
Research and Development		$0	$0
Sales, General and Admin.		$13,356,000	$14,665,000
Non-Recurring Items		$0	$0
Other Operating Items		$2,298,000	$2,213,000
Operating Income		$4,969,000	$4,910,000
Additional income/expense items		$0	$620,000
Earnings Before Interest and Tax		$4,969,000	$5,530,000
Interest Expense		$1,004,000	$607,000
Earnings Before Tax		$3,965,000	$4,923,000
Income Tax		$1,296,000	$1,602,000
Minority Interest		$0	$0
Equity Earnings/Loss Unconsolidated Subsidiary		$0	$0
Net Income-Cont. Operations		$2,669,000	$3,321,000
Net Income		$2,737,000	$3,363,000
Net Income Applicable to Common Shareholders		$2,737,000	$3,363,000
Statement of retained earnings                                                                              2017                                                                                                                                                                                           Retained earnings, 2016                           8,188,000             plus net income                                         2,737,000 total                                                       =10,925,000 minus dividends                                      (1,356,000) retained earnings, 2017                            9,569,000 Balance Sheet
Current Assets
Cash and Cash Equivalents		$2,512,000	$4,046,000
Short-Term Investments		$0	$0
Net Receivables		$0	$0
Inventory		$8,309,000	$8,601,000
Other Current Assets		$1,169,000	$1,483,000
Total Current Assets		$11,990,000	$14,130,000
Long-Term Assets
Long-Term Investments		$0	$0
Fixed Assets		$24,658,000	$25,217,000
Goodwill		$0	$0
Intangible Assets		$0	$0
Other Assets		$783,000	$915,000
Deferred Asset Charges		$0	$0
Total Assets		$37,431,000	$40,262,000
Current Liabilities
Accounts Payable		$10,989,000	$11,654,000
Short-Term Debt / Current Portion of Long-Term Debt		$1,718,000	$815,000
Other Current Liabilities		$1,000	$153,000
Total Current Liabilities		$12,708,000	$12,622,000
Long-Term Debt		$11,031,000	$11,945,000
Other Liabilities		$1,878,000	$1,915,000
Deferred Liability Charges		$861,000	$823,000
Misc. Stocks		$0	$0
Minority Interest		$0	$0
Total Liabilities		$26,478,000	$27,305,000
Stock-Holders Equity
Common Stocks		$46,000	$50,000
Capital Surplus		$5,661,000	$5,348,000
Retained Earnings		$5,884,000	$8,188,000
Treasury Stock		$0	$0
Other Equity		($638,000)	($629,000)
Total Equity		$10,953,000	$12,957,000
Total Liabilities & Equity		$37,431,000	$40,262,000
Cash Flow
Net Income		$2,737,000	$3,363,000
Cash Flow-Operating Activities
Depreciation		$2,298,000	$2,213,000
Net Income Adjustments		$508,000	($812,000)
Changes in Operating Activities
Accounts Receivable		$0	$0
Changes in Inventories		$293,000	($316,000)
Other Operating Activities		$36,000	$227,000
Liabilities		($543,000)	$579,000
Net Cash Flow-Operating		$5,436,000	$5,958,000
Cash flows-Investing Activities
Capital Expenditures		($1,547,000)	($1,438,000)
Investments		$28,000	$24,000
Other Investing Activities		$46,000	$1,922,000
Net Cash Flows-Investing		($1,473,000)	$508,000
Cash Flows-Financing Activities
Sale and Purchase of Stock		($3,485,000)	($3,183,000)
Net Borrowings		($664,000)	($85,000)
Other Financing Activities		$0	$0
Net Cash Flows-Financing		($5,497,000)	($4,630,000)
Effect of Exchange Rate		$0	$0
Net Cash Flow		($1,534,000)	$1,836,000

Answer 1

A. PROJECTED INCOME STATEMENT
Particulars	Year ending	Year ending	Year ending	projection	Basis
	30-01-2016 ($)	28-01-2017 ($)	28-01-2018 ($)	ratio
Total revenue	73785000	69495000	65454429	0.94
Cost of revenue	51997000	48872000	45818100	0.70	Cost margin
Gross Profit	21788000	20623000	19636329	0.30	GP margin
Sales, General &	14665000	13356000	12717006	0.65	as % of GP
Admin Expenses
Other operating item	2213000	2298000	2188056	0.11	as % of GP
Operating Income	4910000	4969000	4731267
Additional Income	620000
Interest expense	607000	1004000	955965	0.20	as % of op inc
Earnings before tax	4923000	3965000	3775302
Income Tax	1602000	1296000	1233995	0.33	as % of EBT
Net Income	3321000	2669000	2541306

B. IMPACT ON INCOME STATEMENT

The income has declined as compared to the previous year 2017.