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    Case Study Financial Statements Future Prospects

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    Essam Radwan

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    Case Study Financial Statements Future Prospects

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    Copyright:

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    Download as xlsx, pdf, or txt
    16 views14 pages

    Case Study Financial Statements Future Prospects

    Uploaded by

    Essam Radwan

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
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    PRIVATE COMPANY INC.

    FINANCIAL STATEMENTS DECEMBER 31, 20XX

    Private and Confidential


    PRIVATE COMPANY INC. INDEX TO FINANCIAL STATEMENTS
    DECEMBER 31, 20XX

    Notice to Reader
    Exhibit A – Income Statement Exhibit B – Balance Sheet Exhibit C – Cash Flow Statement
    Future Prospects

    Accountant & Co.


    Chartered Professional Accountants

    Telephone: (800) 000-0000


    Fax: (800) 000-0000
    To the Shareholders of Private Company Inc.
    NOTICE TO READER
    Based on information provided by management, we have compiled the non- consolidated
    balance sheet of Private Company Inc. as at December 31, 20XX and the non-consolidated
    statements of retained earnings, income and cash flow for the year then ended. We have
    not performed an audit or a review engagement in respect of these financial statements
    and, accordingly, we express no assurance thereon. Readers are cautioned that these
    statements may not be appropriate for
    their purposes.

    Accountant & Co.


    Chartered Professional Accountants

    January 30, 20XX


    New York, NY

    Exhibit A
    NC.
    MBER 31, 20XX

    AL STATEMENTS

    hibit C – Cash Flow Statement

    11000 Finance Street


    New York, NY
    Telephone: (800) 000-0000
    Fax: (800) 000-0000
    ompiled the non- consolidated
    20XX and the non-consolidated
    the year then ended. We have
    of these financial statements
    rs are cautioned that these

    Exhibit A
    PRIVATE COMPANY INC. INCOME STATEMENT
    FOR THE YEAR ENDED DECEMBER 31, 20XX

    Year 0 Year -1
    Revenue $93,086 $ 86,698

    Cost of Goods Sold 39,639 37,756

    Gross Profit 53,447 48,942


    Expenses
    Distribution Expenses 6,166 6,421

    Marketing and Administration 30,830 26,569

    Research and Development 2,026 1,931

    Depreciation 2,907 2,803

    Earnings Before Interest and Tax 11,518 11,218

    Interest Expense 1,240 1,240


    Earnings Before Tax 10,278 9,978

    Taxes 1,570 2,429

    Net Income $8,708 $ 7,549


    TEMENT
    1, 20XX

    Year -2
    $ 81,422

    38,121

    43,301

    5,884

    23,507

    1,764

    2,960

    9,186

    1,240
    7,946

    2,761

    $ 5,185
    Exhibit B
    PRIVATE COMPANY INC.
    BALANCE SHEET DECEMBER 31, 20XX

    Year 0 Year -1
    Assets

    Cash $10,159 $5,918


    Trade and Other Receivables 14,721 14,074
    Inventory 8,036 7,691
    Property Plant and Equipment 21,175 20,371
    Total Assets $54,091 $48,054

    Liabilities

    Trade and Other Payables $11,077 $10,504


    Income Taxes Payable 581 894
    Long-Term Debt 20,000 20,000
    Total Liabilities 31,658 31,398
    Shareholder's Equity
    Common Stock and Additional Paid-In Capital 7,627 7,627
    Retained Earnings 14,806 9,029
    Shareholder's Equity 22,433 16,656
    Total Liabilities & Shareholder's Equity $54,091 $48,054
    Exhibit B

    Year -2

    $5,289
    12,685
    7,168
    19,263
    $44,405

    $10,001
    1,088
    20,000
    31,089

    7,627
    5,689
    13,316
    $44,405
    Exhibit C
    PRIVATE COMPANY INC. CASH FLOW STATEMENT
    FOR THE YEAR ENDED DECEMBER 31, 20XX

    Year 0 Year -1
    Operating Cash Flow

    Net Income 8,708 7,549


    Plus: Depreciation & Amortization 2,907 2,803
    Changes in Operating Assets and Liabilities:
    Trade and Other Receivables (647) (1,389)
    Inventory (345) (523)
    Trade and Other Payables 573 503
    Income Taxes Payable (313) (194)
    Cash Flows from Operating Activities 10,883 8,749

    Investing Cash Flow

    Acquisitions of Property and Equipment (3,711) (3,911)


    Cash Flows from Investing Activities (3,711) (3,911)

    Financing Cash Flow

    Increase/(Decrease) in Long-Term Debt - -


    Dividends (current year) (2,931) (4,209)
    Issuance of Common Stock - -
    Cash Flows from Financing Activities (2,931) (4,209)

    Increase/(Decrease) in Cash and Equivalents 4,241 629

    Cash and Equivalents, Beginning of the Year 5,918 5,289


    Cash and Equivalents, End of the Year 10,159 5,918

    MANAGEMENT’S DISCUSSION OF FUTURE PROSPECTS


    Revenue Growth
    Upon reviewing the company’s financial performance and market conditions, we
    expect our revenue to grow by 6.0% for the next five years.

    Working Capital
    We forecast our accounts receivable days and accounts payable days to be 60 days and
    100 days respectively for Years 1 to 5. We expect the number of days it takes to sell our
    inventory to be 75 days over the same time period.

    Costs and Expenses


    We are facing minor pressure from higher raw material costs and transportation costs,
    which will impact our gross margin. However, we anticipate our gross margin to be steady
    at 55.0% over the next five years. Distribution expense, research and development expense
    and depreciation are expected to remain constant for the next five years at 7.5% of sales,
    2.3% of sales, and 3.2% of sales, respectively.
    Marketing and administrative expenses are projected to be 32,063 in Year 1, 33,346
    in Year 2, 34,680 in Year 3, 36,067 in Year 4, and 37,509 in Year 5.

    Capital Assets
    We expect to purchase enough property, plant and equipment (PP&E) every year to
    maintain a capital asset turnover ratio of 4.25x. As noted above, we assume depreciation
    will be 3.2% of sales from Year 1 to Year 5.

    Debt and Interest


    We have no plans to issue or repay debt over the next five years. The interest expense on
    our debt remains at 6.2%.

    Taxes
    The applicable tax rate based on our earnings before tax is 30.0% for the coming
    five years. Additionally, our Income Tax Payable for Years 1 to 5 is expected to be 37.0% of
    income tax expense in each respective year.
    Dividends
    Our dividend payout ratio over the next five years will be 70% of net income in each
    respective year.
    Exhibit C

    Year -2

    5,185
    2,960

    (1,280)
    (470)
    490
    50
    6,935

    (3,005)
    (3,005)

    -
    (4,312)
    -
    (4,312)

    (382)

    5,671
    5,289

    S
    tions, we

    o be 60 days and
    takes to sell our

    portation costs,
    argin to be steady
    evelopment expense
    s at 7.5% of sales,

    ear 1, 33,346

    very year to
    ume depreciation

    nterest expense on

    e coming
    cted to be 37.0% of
    ome in each

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