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After-Class Exercise For Pro Forma Financial Statements

The document provides the actual income statement and balance sheet for New Age Sporting Goods Inc. for 2011. It also lists assumptions to be used to prepare pro forma financial statements for NASG for 2012, including assumptions about sales growth, expenses, financing activities, and other line items. The assistant is asked to prepare pro forma income statement, balance sheet, and statement of cash flows for NASG for 2012 based on the assumptions and actual 2011 statements, and determine if any assumptions need revising.

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Sagar Bansal
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266 views

After-Class Exercise For Pro Forma Financial Statements

The document provides the actual income statement and balance sheet for New Age Sporting Goods Inc. for 2011. It also lists assumptions to be used to prepare pro forma financial statements for NASG for 2012, including assumptions about sales growth, expenses, financing activities, and other line items. The assistant is asked to prepare pro forma income statement, balance sheet, and statement of cash flows for NASG for 2012 based on the assumptions and actual 2011 statements, and determine if any assumptions need revising.

Uploaded by

Sagar Bansal
Copyright
© © All Rights Reserved
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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After-Class Exercise for the Preparation of Pro Forma Financial Statements You are a financial analyst covering the

stock of New Age Sporting Goods Inc. (NASG), a retailer of sporting goods operating in the northeast region. ne of your clients, a large institutional investor fro! Asia, has recently re"uested a detailed invest!ent report a#out NASG. In the re"uest, this client specifically asked that the report include the pro for!a financial state!ents for the year $%&$. 'elow are the actual inco!e state!ent and #alance sheet for New Age Sporting Goods Inc. (NASG) for the year $%&&. Income Statement for the Year 2011 (In thousands) Sales (evenue -.penses/ 0ost of Goods Sold 3arketing and Ad!inistrative Interest Inco!e 5a.es 5otal -.penses Net Inco!e Balance Sheet as of the End of Year 2011 (In thousands) 0ash Accounts (eceiva#le Inventories 6repay!ents 5otal 0urrent Assets 6roperty, 6lant, and -"uip!ent (net) ther Assets 5otal Assets Accounts 6aya#le Notes 6aya#le ther 0urrent 8ia#ilities 5otal 0urrent 8ia#ilities 8ong9ter! :e#t ther Noncurrent 8ia#ilities 5otal 8ia#ilities 0o!!on Stock Additional 6aid9in 0apital (etained -arnings 5otal Shareholders; -"uity 5otal 8ia#ilities and S1

)*+,,&$ 12,2*1 &$,*2* 4%1 &,2*& *%,4+& )$,1*&

),2 4%% &,,%1, 2$7 &2,++* &2,*4, &,1%4 )+$,*&7 )2,7%4 &,**$ $,&*, 7,74+ 7,4%7 ,&& )$%,%7+ $+% 2+7 &&,724 &$,4$1 )+$,*&7

'ased on your thorough research on the #usiness of NASG and its operating environ!ent, you have set up the following assu!ptions a#out NASG<s operation, invest!ent, financing, and other activities for the year $%&$. &. $. +. ,. 2. 1. Sales will grow $$= 0ost of goods sold will e"ual 4*.1= of sales Selling and ad!inistrative e.penses will e"ual &2.2= of sales Interest e.pense will e"ual 4= of average interest9#earing de#t Inco!e ta. e.pense will e"ual +4= of inco!e #efore inco!e ta.es 0ash will e"ual the a!ount necessary to e"uate total assets with total lia#ilities plus shareholders; e"uity 4. Accounts receiva#le will increase at the growth rate in sales *. Inventory will turn over 2.$ ti!es per year 7. 6repay!ents will increase at the growth rate in sales &%. 6lant assets (net) will grow at &*.7= per year &&. ther assets will increase at the growth rate in sales &$. Accounts paya#le will turn over &+.% ti!es per year &+. Notes paya#le will increase to )$,%%% !illion in the year $%&$ and thereafter increase )&%% !illion each year &,. ther current lia#ilities will grow at the growth rate in sales &2. 8ong9ter! de#t will grow at the growth rate in property, plant, and e"uip!ent &1. ther non9current lia#ilities will increase at the growth rate in sales &4. 0o!!on stock and additional paid9in capital will not change &*. :ividends for the year $%&& were )+7& and will increase at a $2= growth rate &7. :epreciation e.pense for the year $%&& was )1,7 and will increase at the growth rate in property, plant, and e"uip!ent $%. 5he change in ther Noncurrent Assets is an investing activity $&. 5he change in ther Noncurrent 8ia#ilities is an operating activity. Re !irement" (&) 6repare a pro for!a inco!e state!ent, #alance sheet, and state!ent of cash flows for NASG for the year $%&$. ($) After you have prepared the pro for!a state!ent of cash flows, do you see the need to revise so!e of the assu!ptions you have !ade> ?hich assu!ptions> -.plain your decision.

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