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Financial statements forecasting

See the attached file (financial statement) for selected financial statements for Micro Chip Computer Corporation. Answer questions 1 and 2 below based on the financial data:

1. Determine the year-to-year percentage annual growth in total net sales.
2. Based only on your answers to question #1, do you think the company will hit its sales goal of +10% annual revenue growth in 2005? Determine the target revenue figure, and explain why you do or do not feel that the company can hit this target.

Next, consider Micro Chip's Consolidated Statement of Operations for the year ended September 25, 2004 (see the attached file: Consolidated Statement of Operations) and answer questions 3 and 4:

3. Use the Percentage of 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.
4. Discuss your results from question number #1. What assumptions have you made? Do any of your assumptions seem unreasonable?

* Please show all work, including formulas and calculations used to arrive at financial values. Excel must be provided and an adequate explanation of the methodology used to arrive at the answers.


Solution Preview

1. See Excel spreadsheet.

2. In order to increase sales by 10% the target revenue figure is $8,334 M * 1.1 = $9,167 M.
Two scenarios support this target revenue ...

Solution Summary

This solution provides forecasts of financial statements using the percentage of sales method and analyzes the results and assumptions.