WEEK FOUR INDIVIDUAL ASSIGNMENT

Analyzing Pro Forma Statements

Robert R. Gonzales
FIN/571 Corporate Finance
03/03/2014
Gurpreet Atwal

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An initiative has been proposed by one of our executives to expand our product
line in an attempt to increase XYZs sales. The Finance department has been asked to
create Pro Forma financial statements, covering the next five years, to help assess the
possible financial impacts of such an endeavor. The Pro Forma statements are based on
the current years Balance Sheet and Profit/Loss Statement and are projected for a 20%
increase in sales each year for the next five years.
Analysis of the Pro Forma statement indicates that sales will increase from the
current level of $1,747,698 to $4, 348,832 by the end of the projected year five. After
adjusting appropriately, for increased cost to produce sales and taxes on the increased
income, we will increase from the present level of $144,335 to $359,153 by the end of
year five. The Current Assets accounts of Cash, Accounts Receivable, Inventory, and
Prepaid Assets are also projected to increase. Cash is projected to increase from the
current amount of $10,535 to $26,190 by the end of the projected year five. Accounts
Receivable will increase from the current amount of $27,000 to $67,185 by the end of
year five.
Inventory will increase from the current amount of $30,000 to $74,650 by the end
of the projected period, and Prepaid Assets will climb from $2,000 to $4,977. Total Fixed
Assets are also projected to increase from the current amount of $300,000 to $746,496.
Along with the increase of these asset accounts, the Liabilities Account of Account
Payable will increase from $5,000 to $12,442 by the end of projected year five.
Based on the Pro Forma projections, increasing sales by expanding the product
line will be good for the bottom line. Not only will Net Sales be increased by
approximately 250% but Net Income will also be increased by approximately 250%.

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Cash on hand will also increase approximately 260% over the five-year period, and
Accounts Receivable will also increase over 200%. With the increase of retained
earnings over the five year period, financing for this project can be done in-house by
applying the net income/retained earnings right back into the company to help fund the
increase in the product line.

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References
ABC SDN BHD D&B. (2006) Retrieved from http:// www. Dnb.com/sample
Malaysia Comprehensive Report.pdf.
March 2, 2014, (2011-2013). Analyzing Financial Statments.com