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Maxs Grocery Mart- Projected Income Statement - Research Paper Example

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Maxs Grocery Mart- Projected Income Statement
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Max's Grocery Mart is a family-owned business that has been experiencing a stable growth since its inception. Mr. Leroy Feronti, the owner of the business now wants to expand the business by renovating the grocery mart building with a bank loan.
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To help the application for bank loan, Mr. Feronti has prepared the pro forma financial statements for three years from 2007 onwards. The data of the accounting period 2006 are taken as the base, upon which the projections for 2007, 2008 and 2009 are based. The bank has demanded to prepare Pro forma Income Statement for three years on the basis of the likely growth and other important parameters of the firm. The statements are prepared projecting the future likely growth of the firm. The growth rates estimated are 7.25, 7.75 and 8.25 annually. The projected in come statement exhibits that at 7.25% growth rate, the firm will be able to achieve $ 477175 net income. Similarly, for the year 2008 and 2009, the projected net income is $479400 and $481624 respectively. Mr. Feronti is also asked to prepare projected income statement to reflect the changes in sales at various rates. The income statement is also prepared to reflect the impact on the net income of the increase in workers hourly rate from $12 to $14 and Mr. Feronti's salary is reduced from 15% to 8% of Gross Profit. The impact of increase in the number of workers from 17 to 19 is also projected through income statement.






Table of Contents

Introduction 4
Discussion 5
Projected Income Statement for the Year 2007, 2008 and 2009 7
Statement Showing the Impact on Net Profit on account of 9% growth in sales 9
Statement Showing the Impact on Net Profit on account of 9.5% growth in sales 10
Statement Showing the Impact on Net Profit on account of 10% growth in sales 11
Statement Showing the Impact on Net Profit on account of 4% growth in sales 12
Statement Showing the Impact on Net Profit on account of 5% growth in sales 13
Statement Showing the Impact on Net Profit on account of 5.5% growth in sales 14
Pie Chart 16
Statement showing the impact on Net Income of the changes in employee hourly rate and Mr. Feronti's Salary 17
Statement showing the impact on Net Income of the changes in the no. of employees from 17 to 19 18
Recommendations 20
Appendix 21





Introduction

Max's Grocery Mart is a family-owned business that has been experiencing a stable growth since its inception. Mr. Leroy Feronti, the owner of the business now wants to expand the business by renovating the grocery mart building with a bank loan. To finance the business expansion, Mr. Feronti has approached a bank. The bank wants Mr. Feronti to prepare Pro forma Income Statement for three years to substantiate the loan allocation as a formality. The pro forma financial statements are usually prepared in line with the likely changes in the financial affairs of a firm. Mr. Feronti prepared the statements taking into account the various changes that are likely to incur in his business. First, Income statement is prepared to reflect the growth at 7.25%, 7.75 %and 8% rates. The projected in come statement exhibits that at 7.25% ...Download file "Maxs Grocery Mart- Projected Income Statement" to see next pagesRead More
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