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1. (50 points) Prepare proforma forecasts of financial statements of Simple, Inc for two years, 2021 and 2022. What are the company's forecasted Net Earnings (profit/loss after tax) and additional financing requirements (overdrafts) in 2021 and in 2022? The assumptions, however, will be different from the assumptions for the homework. Assumptions, in 2021 and 2022, sales will grow at 15% per year, CGS will equal 42% of sales, SGA will equal 53% of sales, DRO will be maintained at 35 days, DPO will be at 25 days, while DS! will be reduced by 10 days in each of the two years. The ratio of fixed assets relative to sales will increase by 3% in each of the two years. Minimum cash balance will be maintained at 5% of total assets. Assume interest rate of 6% per year, and effective tax rate of 29%. All other accounts will be maintained at ratios to sales similar to those during 2020. Simple, Inc. Financial Statements in S milions Fiscal Year Ended Dec. 31 2017 (S) 2018 ( (S) 12 691es) TO FORECAST TO FORECAST 2020 2021 2022 Assumptions estimated 2018 (5) (sales) 96 Sales Past data Income Statement Tumover cost of sales Gross profit 303.7 127.7 178.0 100.0 420 58.0 33021 130.9 199.2 100.0 39.7 60.3 374.1 149.0 225.1 100.0 13.33% 39.8 5 of sales 80.2 mechanics 15% 59.80% 430.2 171.2 259.0 5094 09 Operating expenses excluding exceptional c exceptional costs Restructuring costs Net Interest expense Protit before tax Tax expense ex Profit(1085) after tax 0% 151.4 4.5 16.6 0.1 8.4 8.0 (4.8) 49.9 1.5 5.5 0.0 1.1 2.8 15 188.2 0.0 2.7 1.5 28.8 10.4 1814 50.3 0.0 0.8 0.5 8.7 3.2 5.8 195.7 112 1.0 4.4 12.8 SLS 193 52.3 of Sales 3.0 Unusual 0.3 inusual 1.2 interest rate 3.4 mechanical 0.9 pineta taxa 2.5 mechanical 996 2164 0 10 5.2 37.4 10.2 2712 27 343 Ordinary dividends Pront(loss retained 10.9 (15.5) 3.8 -5.1 10.9 7.5 3.3 2.3 10.9 11.8) 2.9 conscart 2 -0.4 mechanical 10.9 16.3 8.899 sales growth Interest rate, approximate tax rate 13.396 0.139 27 3456 Fiscal Year Ended Dec 31 2017 IS) 2018 151 Batanee Sheet 2010 IS 5 190 S9les 19. seles) 182 Bales 34.0 12 19.2 58 2017 Assets Cash Excess cash (PLUG) Accounts receivable Inventories Other current assets Net fized 855ets Other assets Total assets 27.8 38.8 12.5 87.8 0.0 200.7 0.2 12.7 4.1 28.9 0.0 68.11 30:3 44.7 15.6 104.7 8.0 + 220.5 92 19.5 27 31.7 1.8 68.8 903 54.3 17.5 0.8 e 7 230.1 3.7 min level PLUG 3.1 DRO 13.7 OSI 47 of sales 29.8 of sales 1.89 of sales 15 mechanical 29.6 25.7 698 29:56 1.750 1197 0 34 B 59.0 201 +27 2 77 262.6 82 3.5 Llablities and equity Accounts payable Taxes payable Accruals Overdrafts (PLUG) other current abilities Long-term Habilities Other labuities Shareholders' Equity Total liabs, and equity 15.0 11.3 10.8 0.0 28 28.0 127 114.3 2007 43 3.7 3.6 00 7.1 9.2 01.8 37.8 66.1 20.5 11 15.8 03 1.33 38.7 1.0 1213 22015 227 0.13 2.0 13 0.3 86.8 68.8 1017 7.1 11.5 0.7 16.9 8112 04 21.8 230 2.9 DDD 262 1.91136 of sales 1905 53 of sales 310790 0.2 PLUG 45% a sales 5296 18.2 DEBT Constant 0.1 of sales O D. 192.5 last years Siret eam 81.5 mechanical 1213 8.2 1312 91 19.4 61.8 05 137.5 20 difference 92 1. Net eamings 2. Overdrafts 272 9.1 base case 27 0949 93 TASTLE TAKTLE PLUG ONERDRAFTS 1. (50 points) Prepare proforma forecasts of financial statements of Simple, Inc for two years, 2021 and 2022. What are the company's forecasted Net Earnings (profit/loss after tax) and additional financing requirements (overdrafts) in 2021 and in 2022? The assumptions, however, will be different from the assumptions for the homework. Assumptions, in 2021 and 2022, sales will grow at 15% per year, CGS will equal 42% of sales, SGA will equal 53% of sales, DRO will be maintained at 35 days, DPO will be at 25 days, while DS! will be reduced by 10 days in each of the two years. The ratio of fixed assets relative to sales will increase by 3% in each of the two years. Minimum cash balance will be maintained at 5% of total assets. Assume interest rate of 6% per year, and effective tax rate of 29%. All other accounts will be maintained at ratios to sales similar to those during 2020. Simple, Inc. Financial Statements in S milions Fiscal Year Ended Dec. 31 2017 (S) 2018 ( (S) 12 691es) TO FORECAST TO FORECAST 2020 2021 2022 Assumptions estimated 2018 (5) (sales) 96 Sales Past data Income Statement Tumover cost of sales Gross profit 303.7 127.7 178.0 100.0 420 58.0 33021 130.9 199.2 100.0 39.7 60.3 374.1 149.0 225.1 100.0 13.33% 39.8 5 of sales 80.2 mechanics 15% 59.80% 430.2 171.2 259.0 5094 09 Operating expenses excluding exceptional c exceptional costs Restructuring costs Net Interest expense Protit before tax Tax expense ex Profit(1085) after tax 0% 151.4 4.5 16.6 0.1 8.4 8.0 (4.8) 49.9 1.5 5.5 0.0 1.1 2.8 15 188.2 0.0 2.7 1.5 28.8 10.4 1814 50.3 0.0 0.8 0.5 8.7 3.2 5.8 195.7 112 1.0 4.4 12.8 SLS 193 52.3 of Sales 3.0 Unusual 0.3 inusual 1.2 interest rate 3.4 mechanical 0.9 pineta taxa 2.5 mechanical 996 2164 0 10 5.2 37.4 10.2 2712 27 343 Ordinary dividends Pront(loss retained 10.9 (15.5) 3.8 -5.1 10.9 7.5 3.3 2.3 10.9 11.8) 2.9 conscart 2 -0.4 mechanical 10.9 16.3 8.899 sales growth Interest rate, approximate tax rate 13.396 0.139 27 3456 Fiscal Year Ended Dec 31 2017 IS) 2018 151 Batanee Sheet 2010 IS 5 190 S9les 19. seles) 182 Bales 34.0 12 19.2 58 2017 Assets Cash Excess cash (PLUG) Accounts receivable Inventories Other current assets Net fized 855ets Other assets Total assets 27.8 38.8 12.5 87.8 0.0 200.7 0.2 12.7 4.1 28.9 0.0 68.11 30:3 44.7 15.6 104.7 8.0 + 220.5 92 19.5 27 31.7 1.8 68.8 903 54.3 17.5 0.8 e 7 230.1 3.7 min level PLUG 3.1 DRO 13.7 OSI 47 of sales 29.8 of sales 1.89 of sales 15 mechanical 29.6 25.7 698 29:56 1.750 1197 0 34 B 59.0 201 +27 2 77 262.6 82 3.5 Llablities and equity Accounts payable Taxes payable Accruals Overdrafts (PLUG) other current abilities Long-term Habilities Other labuities Shareholders' Equity Total liabs, and equity 15.0 11.3 10.8 0.0 28 28.0 127 114.3 2007 43 3.7 3.6 00 7.1 9.2 01.8 37.8 66.1 20.5 11 15.8 03 1.33 38.7 1.0 1213 22015 227 0.13 2.0 13 0.3 86.8 68.8 1017 7.1 11.5 0.7 16.9 8112 04 21.8 230 2.9 DDD 262 1.91136 of sales 1905 53 of sales 310790 0.2 PLUG 45% a sales 5296 18.2 DEBT Constant 0.1 of sales O D. 192.5 last years Siret eam 81.5 mechanical 1213 8.2 1312 91 19.4 61.8 05 137.5 20 difference 92 1. Net eamings 2. Overdrafts 272 9.1 base case 27 0949 93 TASTLE TAKTLE PLUG ONERDRAFTS