Financial management - Essay Example

Question Micro Chip Computer Corporation Selected Financial ments Year-to-year annual growth in total net sales The answers in the following table are reached by calculating the percentage increase in sales in each subsequent year (Prepared from Excel).  20042005200620072008Net Sales$11,062 $11,933 $9,181 $6,141 $8,334 Growth(11062-11062) /11062(11933-11062) /11062(9181-11933) /11933(6141-9181) /9181(8334-6141) /6141Percentage Growth (Growth *100%)$0.00 7.87%-23.06%-33.11%35.71%2. 10% sales targetThe sales growth is shown as 0% in 2004 because it is used as the base year.

Based on the answers above, the company achieved its sales goal of +10% annual revenue growth in 2009. This is because the growth in 2008 was 35.71%, meaning that the company achieved proportional sales growth. The target revenue figure is 110% of $8334, which is equal to $9167.4. Question 2: Micro Chips Consolidated Statement of Operations3. Forecasted Statement of Operations The forecast presented below was made using excel, and the calculations are explained as follows: In the forecasted statement of operations presented below, the sales figure for 2009 has been increased by 20%.

Assuming that the cost of sales also increases by the same figure, the cost of sales has been increased by the same margin. R&D costs are assumed to remain the same for the two years, and the selling and administrative costs to increase by 20% of the figure in the previous year. Restructuring costs are computed as 2% of the total sales, and the taxation rate as 15% of the sales figure. After all this assumptions, the following forecasted statement is prepared. 9/26/2007 to 9/25/2008Forecasted Statement for9/26/2008 to 9/25/2009Sales$8,334.00$10,000.80Cost of Sales$5,458.00$6,549.60Gross Margin$2,876.00$3,451.20Operating Expenses:R&D$525.00$525.00Selling, General and Administrative Expenses$691.00$829.20In-process R&DRestructuring Costs $200.

02Total Operating Expenditure$1,216.00$1,554.22Operating Income$1,660.00$1,896.98Total Interest and Other Income, net$194.00$194.00Income before Provision for Income Taxes$1,854.00$2,090.98Provision for Income Taxes (15%)$278.10313.6476Net Income$1,575.90$1,777.344. The results shown above indicate that the net income for period September 26, 2008 through to September 25, 2009 indicate that Microchip Computer Corporation will earn a net income of $1777.34. To calculate this increase in net income is derived from a 20% increase in net sales, which is accompanied by a corresponding increase in cost of sales.

The selling, general and administrative costs are also assumed to increase by the same figure. The forecast of the consolidated statements of operations included the following assumptions:The cost of sales increases at the same rate as the salesR&D costs remain constant for the following yearThe selling, general and administrative expenses increase at the same rate as the salesInterest and other income remains constant for the following year.These assumptions are reasonable because the increasing expenses are expected to increase with sales, while the constant expenses and revenues are not a factor of the sales figure.