Analyzing Pro Forma StatementsYour nameUniversity of PhoenixFIN 571: Foundations of Corporate Finance Jana Bradley October 13, 2014
The XYZ Company has reviewed where the company stands and has decided that the company needs to find a way to increase revenue. The company has to decide upon an initiative that will increase the sales over the next five years. The senior management team and the finance department will collaborate to provide information on why the particular initiative will best help the company to grow over the next five year term. Analyzing Pro Forma StatementsThe company has decided to choose an initiative that has been proposed by the senior management team. The proposal suggest that the company expands the product line. Expanding the product line will make an effort to increase XYZ’s sales. The finance department has created a Pro Forma financial statement that covers the next five years. The financial statement will help measure the financial impact that the expanded product line can do for the company. The Pro Forma statements are based on the current year Balance Sheet and Profit/Loss Statement. The statement reveals that the company is projected for a 20% increase in sales each year, for the next five years. The Pro Forma statement shows the sales for the current level of $1,747,698 will skyrocket to $4,348,832 by the end of the five year term. After the financial department took into consideration the increased cost to produce the sales, which included hiring, purchasing materials, and other important components to expand the product line, and taxes on the increased income. After making the adjustments, the company will increase the Net Profit from $144,335 to $359,153 by the end of the five year term. The balance sheet for XYZ Company, Inc. shows the company’s current statement of its asset. The statement reveals accounts of cash, accounts receivable, inventory, and prepaid assets are also anticipated to surge....
References: XYZ balance sheet
XYZ Profit and Loss Statement
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