Hi, Can someone else help with this question please. The prior person was not willing/able to anser the question correctly and entirely. Thank you.

Please fill in all the blank spaces on the spreadsheet and answer questions below using full sentences. Thank you.

After the financial analysis based on 2016 preliminary estimates was completed, a number of changes were adopted to improve financial and business results for S&S Air during 2016. The customer that awarded the large 40 aircraft order agreed to make interim payments as finished aircraft were delivered (for a price concession). Revenue was revised up slightly due to updated marketing plans. Expenses were trimmed and controls were established that greatly reduced on hand inventory needs. A portion of the line of credit was converted to a 5 year, fixed rate loan. Cash on hand and general liquidity was forecasted to improve to acceptable levels by the end of the year.

Mark and Marie approached Chris about creating a forecast for 2017. They had learned the value of the financial analysis done for 2016 and wanted to get a look at any issues or problems that might be looming in the future. Of particular concern was the continuing need for external funds as the firm continued to grow.

The general consensus of Mark and Marie was that S&S Air should realize an increase in revenue of 17% in 2017 from the 2016 results, based on anticipated demand of aircraft. It was felt expenses would change by the same percent of sales as incurred in 2016. However, it was estimated that annual depreciation in 2017 would increase 70% (to a total of $1,075,000), due to the substantial increase in assets that were going to be needed. Finally, Chris said that her banking contract indicted that interest expense should be about 8% of both notes payable and long term debt in 2017.

By the end of 2016, the firm would be operating at capacity; it was estimated that further growth in 2017 would require $6,500,000 (including all depreciation that is, adding $6.5 million to the 2016 Net PP&E to derive PP&E for 2017) in plant upgrades and additions to meet anticipated production volume. Everyone felt that all other asset categories (including cash) and current liabilities (including the line of credit) would change by percent of revenue.

Both owners were concerned about where any needed external financing would come from.

Neither was interested in raising any further equity, and agreed that they would likely secure long term financing for any external funds needed. The plan was to pay dividends totaling $400,000 in 2017.

Chris knew that a key exhibit would be the forecast mode. She planned to set up the model so that a key input would be the sales growth forecast. The plug to reconcile the balance sheet would be long term debt.

1) Complete forecast model, then answer questions below.
Income statement	2016	% rev			2017	% rev
Sales	$21,566,000	100.0%		17%
COGS	14,786,000	68.6%	% of rev	68.6%
Other expenses	2,375,000	11.0%	% of rev	11.0%
Depreciation	625,000	2.9%	given	1,075,000
EBIT	3,780,000	17.5%	calc
Interest	437,000	2.0%	given	8.0%
Taxable income	3,343,000	15.5%	calc
Taxes (40%)	1,337,200	6.2%	calc TI * tax rate	40.0%
Net income	2,005,800	9.3%	calc
Dividends	375,000	1.7%	given	400,000
Add to RE	1,630,800	7.6%	calc
Balance Sheet	2016	% rev			2017	%
Current Assets
Cash	425,000	2.0%	% of rev	2.0%
Accounts rec.	855,000	4.0%	% of rev	4.0%
Inventory	689,000	3.2%	% of rev	3.2%
Total CA	1,969,000	9.1%	calc
Fixed assets
Net PP&E	9,873,000	45.8%	given	6,500,000
Total Assets	11,842,000	54.9%	calc
Current Liabilities
Accounts Payable	727,000	3.4%	% of rev	3.4%
Notes Payable	1,467,000	6.8%	% of rev	6.8%
Total CL	2,194,000	10.2%	calc
Long-term debt	2,908,800	13.5%	PLUG
Total Liability
Shareholder Equity
Common stock	120,000	0.6%	no change
Retained earnings	6,619,200	30.7%	+2017 RE
Total Equity	6,739,200	31.2%	calc
Total L&E	11,842,000	54.9%	calc

Ratio Analysis
	2016	2017		Industry
PM				7.2%
ROA				6.8%
ROE				13.8%
Debt / Equity				1.01
Debt / Total Assets				0.50
Equity Multiplier				2.01
Total Asset TO				0.95
DuPont	ROE	PM	TATO	EM
2016
2017
Industry	13.8%	7.2%	0.95	2.01

Q U E S T I O N S

2) Compare PM, ROA, and ROE from 2016 to 2017. Why the differences?

3) Compare debt ratios from 2016 to 2017. Why the differences?

4) Compare total asset turnover from 2016 to 2017. Why the difference? What observations can you make regarding capacity utilitzation from 2016 to 2017?

5) Estimate the maximum revenue possible given the new level of assets in 2017, based on TATO in 2016 (at full capacity).

6) If COGS could be decreased by 1% of revenue, how much increase in EBIT would result? Express the change in EBIT in both dollar terms and % change.

7) Do a DuPont analysis on S&S Air for both 2016 and 2017. If the owners asked you for any issues or concerns about the basic results forecasted for 2017, what would you tell them? Consider operating, investing, and financing issues.

7a. Operating Comments

7b. Investing Comments

7c. Financing Comments