PRO FORMA

STATEMENTS

JOHN MARK EMERSON G. DIZON

BSA-3B

PERCENTAGE OF
SALES METHOD

ACCOUNTS AND
BALANCES

COST OF SALES
Management believes the COGS as a
percentage
of sale will remain the same as in the
current
year.

OPERATING EXPENSES
(SALES, GENERAL & ADMINISTRATIVE)

The proportion of selling, general and

administrative expenses to sales is
expected to
be the same in 2016 as in 2015.

INTEREST
The interest EXPENSES
expense incurred in 2015 was
on a
long-term loan of the firm, taken several
years
ago. The loan is not due for another 5 years
and
because it is fixed interest loan, the
interest
expense next year will be unchanged from
this
years expense.

TAXES
The firms tax rate at 40 percent is
expected to
remain constant for 2016.

DIVIDENDS
The firm just paid out a 250,000 cash
dividend.
It has currently 500,000 shares outstanding.
The
firm anticipates increasing the dividend to
0.60
per share (or 300,000) in 2016.

CASH
Management feels that the companys
cash
balances are generally adequate for the
present
sales level and would have to increase
proportionately as long as the sales
increase.

The companys present average collection

period
is 45.625 days. Management feels the
companys
present credit policies are appropriate for its
type
of business. As a result, they feel that the
average
collection period will remain approximately
constant, and that A/R will remain a
constant
proportion of sales for 2016.

ACCOUNTS RECEIVABLE

INVENTORY
Management feels the companys inventory
is
properly managed at present. Therefore, they
feel
inventory would have to increase
proportionally
to sales in order to support the sales
increase.

FIXED
ASSETS
Due to effective
and efficient utilization, at
nearly
full capacity, of the companys fixed assets,
the
management feels fixed assets will have to
increase as sales grow. For financial planning
purposes, management is willing to assume
that
the net fixed asset figure on the balance sheet
will
be proportional as the sales increase.

ACCRUED EXPENSES
Accrued expenses are expected to maintain
their
proportionality with sales.

LONG-TERM DEBT
The current long-term debt of 1,000,000 is
not
due for another 5 years, so this amount is
expected to remain outstanding at the end
of
2016. The annual interest rate on the loan is
8
percent.

FINANCING
PREDICAMENTS

ADDITIONAL FINANCING
NEEDED

I.R.E. = F.E.A.T D
I.R.E. = Forecasted Earnings after Tax

Dividends
= 949,500
300,000
= 649,500

EXTERNAL FUNDING
Borrow funds
Issue additional
shares
Cut dividends

EN
D