Essay About Total Net And Annual Revenue Growth

Unit 2 Financial Management Project
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Part OneDetermine the year-to-year percentage annual growth in total net sales.To calculate percentage change, the following formula is used:% change= (New Year net sales-previous year net sales) / (previous year net sales)2004: Starting point: 0%2005: ($11,933-11,062) / ($11,062) = 0.787= 7.87%2006: ($9,181-$11933) / ($11,953) = (-).2306= -23.06%2007: ($6141-$9181) / ($9181) = (-).331= -33.11% 2008: ($8334-$6141) / ($6141) =.3571=35.71%Using the same formula as stated above, solve for 2009 total net sales at 10% annual revenue growth:10 %=( x-2008 net sales) / (2008 net sales).10= (x-8334) / (8334) = 833.4=(x-8334) x=9167.4 2009 Target Revenue net sales is $9167.40Yes, I do believe that a company can achieve its target of $9167.40 in 2009.  Although the company had a decline in total net sales in 2006 and 2007, it rebounded in 2008 with a 35.71% sales growth.  Therefore, I believe that the company has stabilized and can reach its goal of +10% annual revenue growth in 2009.Part TwoUse the Percentage Sales Method and a 25% increase in sales to forecast Micro Chips Consolidated Statement of Operations for the period of September 26, 2008 through September 25, 2009. Assume a 15% tax rate and restructuring costs of 5% of the new sales figure. (See Chart below) Percent of sales = Dividing the balance for the accounts for 2007-2008 by sales revenue (8334.00) for 2007-2008For example: % of sales for cost of sales=(Cost of sales / sales revenue) = $5458 / 8334=.6549=65.49%(Gross margin/sales revenue) = $2876/8334=.3451=34.51%(R&D/sales revenue)=525/8334=.0630=6.30%(Selling, general and administrative /sales revenue) = 691/8334=.0829=8.29%(Total operating expenses/sales revenue) = 1216/8334=.1459=14.59%(Operating income/sales revenue) = 1660/8334=.1992=19.92%(Total interest/sales revenue)=194/8334=.0233=22.25%(Provision for Income taxes/sales revenue) = 278.10/8334=.0334=3.34%(Net Income/sales revenue)=1575.90/8334=.1891=18.91%25% increase in sales = $8334.00 x 1.25+ $10417.50Assuming all categories do not change from 2008-2009 in regards to % of sales (except for restructuring cost):2009 FIGURESCost of sales: (x / 10417.50) = .6549 = $6822.42Gross margin: (x/10417.50) = .3451=$3595.08Total Operating ExpensesR & D= (x / 10417.50) = .0630=$656.30Selling, general and administrative= (x / 10417.50) = .0829= $863.62

Restructuring Cost= (x / 10417.50 = .05=$520.88Total operating expenses= selling, general & administrative + restructuring + R&D = $2040.80% of sales of total operating expenses= (2040.80 / 10417.50) = .1959=19.59%Operating income % of sales decreases by 5% due to restructuring 5% so:19.92% – 5% = 14.92%(x / 10417.50) = .1492= $1554.29Total interest and other income etc. = (x / 10417.50) = .0233= $242.73Income before tax will be 5% less than 2008 due to 5% restructuring cost so: (22.25%-5%)=17.25%Therefore: (x / 10417.50) = .1725= $1797.02Provision for Income Tax= Income before tax X .15= 1797.02 x .15=$269.55(269.55 / 10417.50) =.0259=2.59% (% of sales for Provision for tax income)Net income= Income before provision for taxes – provision for taxes$1797.02 – $269.55 = $1527.47% of sales of net income = $1527.47 / 10417.50=.1466=14.66%2007-2008% of sales2008-2009% of salesSales$8334.00100%$10,417.50100%Cost of sales$5458.0065.49%$6822.4265.49%Gross Margin$2876.0034.51%$3595.0834.51%Operating ExpensesR & D$525.006.30%$656.306.3%Selling, General and Administrative$691.008.29%$863.628.29%In-process R & D0%Restructuring costs0%$520.885%Total Operating Expenses$1216.0014.59%$2040.8019.59%Operating Income$1660.0019.92%$1554.2914.92%Total Interest & other Income net$194.002.33%$242.732.33%Income before provision for Income taxes$1854.0022.25%$1797.0217.25%Provision for Income taxes$278.103.34%$269.552.59%Net Income$1575.9018.91%$1527.4714.66%