Nobody downloaded yet

Financial Management of financial statements - Essay Example

Comments (0) Cite this document
Summary
The growth rate in net sales of Micro Chip Computer Corporation. It can be seen that sales have improved by 7.87% in 2001 compared to the 2000 level. However, sales has significantly dropped the following two years. Double digit declines of 23.06% and 33.11% have been recorded in 2002 and 2003, respectively…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92.9% of users find it useful
Financial Management of financial statements
Read TextPreview

Extract of sample "Financial Management of financial statements"

Download file to see previous pages Micro Chip Computer Corporation's net sales target for 2005 is $9,168 which is 10% higher than what is generated in 2004. This sales budget seems reasonable based on the impressive growth posted by the company in 2004. The sales target of $9,168 is lower than the five year average of $9,330. If the company will continue to recovery from the two-year slump, 10% even seems to be a very conservative target. It should be noted that the pre-2002 net sales reached almost $12,000. It is not impossible that the company can generate this income again.
Question 1.Use the Percentage Sales Method and a 20% increase in sales to forecast Micro Chip's Consolidated Statement of Operations for the period September 26, 2004 through September 25, 2005. Assume a 15% tax rate and restructuring costs of 2% of the new sales figure.
Micro Chip Computer Corporation forecasts that its sales will increase by 20% from the current level. This will result to $10,000.80 gross revenue in the following period. Since the percentage sales method is used to compute the other components of the financial statement, it is assumed that the company will incur the same expenses in proportion to sales. For example, cost of sales was previously 65.49% of total sales. In the computation for the following year, it was also assumed that the company is going to spend 65.49% of its income in cost of sales.
It can be seen that using the percentage sales method lead to some unreasonable assumptions. For one, this method assumes that expenses are directly related to the level of sales. This might seem appropriate for a merchandising firm as the cost of goods sold often bloats with sales revenue. However, it doesn't take into account the possible changes in costs. Also, it should be noted that some of the company's costs does not often vary with sales. Fixed cost like selling, general, and administrative expenses are often fixed regardless of sales level.
Part B
ABC Fitness
Activity ratios indicate how well a company manages to turn its resources into cash, revenue or profit. In the case of ABC Fitness, three significant ratios are computed to measure its relative efficiency. The following table shows the average collection period, inventory turnover, and total assets turnover of the business organization. ABC Fitness has an average collection period of 10 days. Its inventory turnover is 10.23 while assets produced 1.79 times revenue.
Average Collection Period = Current Accounts Receivables/Average Daily Sales, where
Average Daily Sales = Annual Sales/360 days = $2, 004, 016 / 360 days = $5, 560/days
Average Collection Period =$55, 514 / $5,560/days
=9.98 or 10 days
Inventory Turnover = Cost of Goods Sold / Average Inventory = $1, 446, 733 / $141, 350 = 10.23
Total Asset Turnover = Sales / Total Assets = $2, 00 ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Financial Management of financial statements Essay”, n.d.)
Financial Management of financial statements Essay. Retrieved from https://studentshare.org/miscellaneous/1526058-financial-management-of-financial-statements
(Financial Management of Financial Statements Essay)
Financial Management of Financial Statements Essay. https://studentshare.org/miscellaneous/1526058-financial-management-of-financial-statements.
“Financial Management of Financial Statements Essay”, n.d. https://studentshare.org/miscellaneous/1526058-financial-management-of-financial-statements.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Financial Management of financial statements

Financial statements

...?Superior Living is a manufacturing company that produces home furniture. The company’ target market is first time buyers between the ages of 21 to 54. The company currently generates $250 million in revenues. The firm is looking to expand its operations by introducing new product lines. Furniture is a product that has a huge marketplace due to the fact that all homes worldwide need furniture. A hot trend in the industry is the offering of green furniture which is furniture that is produced from renewable sources. A company that has exploited this trend in Europe and currently in the process of penetrating the US marketplace is IKEA. As the VP of finance of Superior it is my duty to prepare the financial...
3 Pages(750 words)Essay

Financial Statements

...for the company’s operating expenses and costs of revenues. Part III. There are several primary intended audiences of the financial statements. They use the financial statement to enhance their decision making activities, in relation to company mentioned in the financial statements. A net profit financial statement encourages the parties to invest in the company. A net loss scares the parties away from investing in the bankrupt company (Wild, Shaw, Chiappetta, 2011). The stockholders use the financial statements as basis for deciding whether to invest more funds in the...
4 Pages(1000 words)Essay

Financial Statements

...?Financial ments 8th, January, Introduction A financial ment can be defined as a record that shows the financial activities of a business, individual, or other entity. Financial statements act as indicators of the financial position of a company and are useful to different users wishing to make financial decisions. The four basic financial statements are balance sheet, income statement, statement of changes in equity, and cash flow statement. Financial statements are important and used by different...
4 Pages(1000 words)Essay

Financial statements

...to take place in a later date, as opposed to the income statement and the cash flow statement, which records transactions that have taken place. References Penner, S. J. (2004). Introduction to health care economics & financial management: Fundamental concepts with practical applications. Philadelphia, Penns: Lippincott Williams & Wilkins. Sinha, G. (2009). Financial statment analysis. New Delhi: PHI Learning Pvt Ltd. US Securities and Exchange Commission. (2007). Beginners' Guide to Financial Statements: The Basics. http://www.sec.gov/investor/pubs/begfinstmtguide.htm Wahlen, J. M., Bradshaw, M., Baginski, S. P., &...
4 Pages(1000 words)Research Paper

Financial Statements

...of accounts rely heavily on the educated judgment of management and the corporate auditor" (Hooke 1998 p.153). The accountant assures that these educated judgments are a fair representation of the company's financial status. When a financial statement is read, there are assumptions made that help to accurately interpret the numbers. By the use of conventions, statements are standardized to assure that they will present an accurate view of the business. One convention is that asset value is based on the original value. No account would be taken due to changing prices over time. Equipment would be depreciated against its original cost, not the replacement...
4 Pages(1000 words)Essay

Financial management. Financial statements and comparative analysis

...important especially when an investor wants to compare the financial statements for a given fiscal year for different industry players. Without the knowledge of when reports are filed, the investor will not be able to get a clear grasp of which among these companies performed the best. Comparing financial investors in the same year will enable the investor to see which company is able to manage the events which directly affected the industry. There should always be consistency in the information presented and statements are only comparable when they are all taken together. The balance sheet is important in showing the movements in the company's...
2 Pages(500 words)Essay

Financial Statements

...I. Essential financial information on the management of the enterprise The memo to the board will inform them that basic financial information will be submitted through the four financial statements that include income statement, balance sheet, statement of stockholders’ equity, and cash flow statement. The financial statements will provide the overall performance of the company, and where financial ratios can be derived and computed to analyze company performance. The introduction of the new spark plug manufacturing process in the Unites States, which is said to be very successful, will be confirmed and validated by the financial statements to be presented. While the financial statements will provide the overall financial health... an...
8 Pages(2000 words)Essay

Financial Statements

...Company Google Source: http finance.yahoo.com/q/is?s=GOOG+Income ment&annual I. Gross profit margin Formula: gross profit total profit = gross profit margin expressed in percentage Year 2010 (number in thousands) Gross profit: 18,904,000 Total Profit: 29,321,000 18,904,000/29,321,000=.64 Gross profit margin : 64% Year 2011 Gross profit: 24,717,000 Total profit: 37,905,000 24,717,000/37,905,000 = .65 Gross profit margin: 65% Year 2012 Gross profit: 29,541,000  Total Profit: 50,175,000   29,541,000 / 50,175,000  = .588 Gross profit margin = 58% II. Operating income margin Formula: operating income/revenue Year 2010 (number in thousands) Operating income: 10,381,000   Revenue: 29,321,000  10,381,000  / 29,321,000 = .35 Operating... Google...
2 Pages(500 words)Essay

A report of 1000 which will require you to produce projected accounts to management by evalueting costs on labour, material and overheads and presenting their results on a cash budget forecast with basic financial statements (income statements and balance

...direct labour is subject to an inflationary pressure of 3% computed monthly. Manufacturing Overhead Budget In the company’s budget, the manufacturing overheads consist of both variable manufacturing and fixed manufacturing overheads. 1. Fixed manufacturing overheads per month would cost the company £ 120 monthly; however depreciation would be deducted from the fixed overheads at the rate of 5% per month. 2. The company would incur variable manufacturing overhead equivalent to £10 per direct labour. In developing the income statement and the balance sheet, the company would employ the absorption costing system ( Stice, Stice & Diamond, 2006, Needles, Powers & Crosson 2010). The formula for developing the overhead...
4 Pages(1000 words)Essay

Financial statements

... are reflected through statement of cash flows. Statement of changes in equity shows the information relating to changes in the equity ownership of the organization. Last part of financial statement is “notes to the financial statements” which provide detailed workings and disclosures of accounting heads that are presented in other components of financial statements (Ramgopal, 2009). References Ramagopal, C. (2009). Accounting for Managers, New Age International. Trident online library.... Financial ments Exposure to financial ments Being the employee of a large textile entity, I have experienced a relatively greater exposure to the financial statements. My job is related to...
1 Pages(250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Financial Management of financial statements for FREE!

Contact Us