Selected Companies Pro Forma
Selected Companies Pro Forma
Apple has become very successful in the technology industry. The company has increased its net sales from 2006 to 2007, which proves they are making good capital budgeting decisions. A pro forma income statement and balance sheet showing the future planning and growth of a company. The pro forma income statement and balance sheet will explain a cash budget, underlying assumptions of calculations, calculations of different ratio analysis, and make recommendations to management. “The most comprehensive means of financial forecasting is to develop a series of pro forma, or projected, financial statements” (2005, Block & Hirt, p. 88, chap. 4).
Financial Statements
A set of financial statements include an income statement and balance sheet for the upcoming year. These financial statements use percent-of-sales method assuming sales for Apple have increased by 15%. “A systems approach is necessary to develop pro forma statements. We first construct a pro forma income statement based on sales projections and the production plan, then translate this material into a cash budget, and finally assimilate all previously developed material into a pro forma balance sheet” (2005, Block & Hirt, p. 88, chap. 4).
Income Statement Pro Forma 2007 % of sales 2008
Net sales (Increase by 15%) $24,006 27,607
Cost of sales 15,852 66.0% 18,230
Gross margin 8,154 9,377
Operating expenses:
Research and development 782 3.3% 899
Selling, general, and administrative 2,963 12.3% 3,407
Total operating expenses 3,745 4,307
Operating income 4,409 5,070
Other income and expense 599 2.5% 689
Income before provision for income taxes 5,008 5,759
Provision for income taxes (calculated on income before tax) 1,512 30.2% 1,739
Net income $3,496 4,020
Balance Sheet Pro Forma
2007 % of sales 2008
ASSETS:
Current assets:
Cash and cash equivalents $9,352 39.0% 10,755
Short-term investments 6,034 25.1% 6,939
Accounts
Apple has become very successful in the technology industry. The company has increased its net sales from 2006 to 2007, which proves they are making good capital budgeting decisions. A pro forma income statement and balance sheet showing the future planning and growth of a company. The pro forma income statement and balance sheet will explain a cash budget, underlying assumptions of calculations, calculations of different ratio analysis, and make recommendations to management. “The most comprehensive means of financial forecasting is to develop a series of pro forma, or projected, financial statements” (2005, Block & Hirt, p. 88, chap. 4).
Financial Statements
A set of financial statements include an income statement and balance sheet for the upcoming year. These financial statements use percent-of-sales method assuming sales for Apple have increased by 15%. “A systems approach is necessary to develop pro forma statements. We first construct a pro forma income statement based on sales projections and the production plan, then translate this material into a cash budget, and finally assimilate all previously developed material into a pro forma balance sheet” (2005, Block & Hirt, p. 88, chap. 4).
Income Statement Pro Forma 2007 % of sales 2008
Net sales (Increase by 15%) $24,006 27,607
Cost of sales 15,852 66.0% 18,230
Gross margin 8,154 9,377
Operating expenses:
Research and development 782 3.3% 899
Selling, general, and administrative 2,963 12.3% 3,407
Total operating expenses 3,745 4,307
Operating income 4,409 5,070
Other income and expense 599 2.5% 689
Income before provision for income taxes 5,008 5,759
Provision for income taxes (calculated on income before tax) 1,512 30.2% 1,739
Net income $3,496 4,020
Balance Sheet Pro Forma
2007 % of sales 2008
ASSETS:
Current assets:
Cash and cash equivalents $9,352 39.0% 10,755
Short-term investments 6,034 25.1% 6,939
Accounts