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Return on equity and pro forma statement

Recalculate ratios 5-11 from using the numbers from the Pro Forma statement below.

5) Times interest earned
6) Debt-to-equity ratio
7) Net profit margin
8) Return on equity
9) Total asset turnover
10) Return on assets
11) Price-earnings ratio

Boeing Pro Forma Income Statement

Revenue 2007 % of Sales 2008
Gross Sales 66387 0.15 99580
cost of goods sold 53402 0.8 53402
Net Sales 12985 0.19 112565

Taxable Income 6118 0.09
Taxes 2060 0.03
Net Income 4058 0.06
Dividends 1129 23
Addition to Retained Earnings 21375

Preparing a pro forma income statement for the coming year with a 15% sales increase will help the management to determine how much funds will need to be raised to make this possible.
If it is determined from this calculation that the profit margin is going to be low than other pricing strategy needs to be considered.

This projection can enable the business to prepare for ways to obtain additional financing to reach a positive income goal. This is not the most accurate but the quickest computation to give them an advance look into the future. Http://www.zenwealth.com/N

PRO FORMA BALANCE SHEET
Assets
Current Assets
1. Cash $1,062,599

2. Marketable securities $5,100,000
3. Accounts Receivable $9,924,850

4. Inventory $10,688,300

Total Current Assets $26,476,600
5. Plant and Equipment $9,161,400

Total Assets $35,638,000
Liabilities and Stockholders' Equity
6. Accounts Payable
$35,118,700

7. Notes Payable $0
8. Long-term Debt $7,455,000
9. Common Stock $5,061,000
10. Retained Earnings $4,543,700
Total Liabilities and Stockholders' Equity $52,178,400

A pro forma balance sheet is created part from the pro forma income statement and using the predicted 15% sales increase. Cash will increase by one percent to $1,062,599 and accounts receivable is projected at a 13% increase totaling $9,924,850. A 14% increase will be seen in the inventory's category totaling $10,688,300 bringing the total current assets to $26,476,600 (a 28% increase). Once you add in the increase in plant and equipment, $9,161,400, the total assets will be $35,638,000. Total assets are projected to increase by 41% in the 2008 fiscal year. While total assets have a significant increase, the total liabilities had a slight increase to $52,178,400. Accounts payable is projected to go up by 46% to $35,118,700 and accounts receivable should be zero since all amounts would be collected by the end of the year. Long term debt and common stock transfer over from the previous year unchanged. Retained earnings are taken from the pro forma income statement in the amount of $4,543,700. Liabilities increasing mean the company will need to find additional financing, because the amount is more than last year.

See attached file.

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recalculate ratios 5-11 from using the numbers from the Pro Forma statement below.

5) Times interest earned
6) Debt-to-equity ratio
7) Net profit margin
8) Return on equity
9) Total asset turnover
10) Return on assets
11) Price-earnings ratio

Boeing Pro Forma Income Statement

Revenue 2007 % of Sales 2008
Gross Sales 66387 0.15 99580
cost of goods sold 53402 0.8 53402
Net Sales 12985 0.19 112565

Taxable Income 6118 0.09
Taxes 2060 0.03
Net Income 4058 0.06
Dividends 1129 23
Addition to Retained Earnings 21375

Preparing a pro forma income statement for the coming year with a 15% sales increase will help the management to determine how much funds will need to be raised to make this possible.
If it is determined ...

Solution Summary

This provides the steps to calculate the Return on equity

$2.19