Polymold Division The Polymold Division case is answering whether or not the CAD/CAM is a good investment. We are looking to answer how it benefits the company, financially. Mr. Martin, the Polymold Division manager felt that sales would continue to decline if Polymold did not invest in the new computer-aided designing and manufacturing system and it would lose market share on its remaining products to its more technologically advanced computers. Mr. Martin feared the marketplace. Polymold manufactured high-quality precision molds with interchangeable parts. When forecasting Polymold Division’s financial statements there are some assumptions that need to be taken into account before projecting the numbers. One of the assumptions is …show more content…
Any additional data that was given would also be taken into consideration. For years 1983-1985, additional corporate assessment expense was given. This would lower Polymold’s earnings on their income statement. Another piece of data that was given is research and development expense. Without the CAD/CAM investment, research and development expense is $130,000. This is double to $260,000 without the CAD/CAM investment. This would lower earnings. We are also given the savings that the investment would yield. Without the CAD/CAM investment, there would still be savings – but not as much as with the CAD/CAM investment, which is due to the depreciation of the equipment and tax credits. Another factor should be how the underlying assumptions of Polymold division play a role in the company’s investment decision. We should select the decision that yields the highest return on assets when producing the forecasted financial statements. We can prepare a balance sheet for the forecasted years and look at how much it differs with and without the CAD/CAM investment. We should also calculate quick ratio, debt/equity ratio, asset turnover ratio, etc. Then, we select which investment gives us the better return on investment. We must also consider the rate of inflation. There are forecasted values of sales with and without the rate of inflation, so we would need to prepare financial statements with and
The income over the last three years has been fluctuating.. This tells us the company has an initial growth period. Sales also drop between years 7 and 8 and the gross profit margin decreased as well. This may be due to operating expenses. This leads to the prospect of stable future sales. The stakeholders are continuing to back the company and the company does predict sales will remain stable. The modest increase in sales does not show enough to recover without making adjustments to free capital.
The questions that follow and the article Comparing the Accuracy and Explainability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value Estimates will inform your completion of Milestone Three. An understanding of the models in this assignment will assist you in hypothesizing the incremental impact of a new investment project for the company. The understanding of these models will contribute to your ability to look toward the future when considering the direction of an organization. This activity is worth a total of 75 points. See the distribution of points listed before each question.
* Our company’s sales forecast has been based on performance from previous years along with market circumstances. We are looking at the future of the business objectively which we then can evaluate past to
The equipment is expected to cost $240,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 96,000 units of the equipment’s product each year. The expected annual income related to this equipment follows.
Estimate the effect of capitalizing software costs on Microsoft’s fiscal 1997, 1998, and 1999 income statements and balance sheets. Assume that 1) 60% of Microsoft’s research and development expenses were incurred after technological feasibility was established, 2) the average product life was two years, 3) the company had always capitalized these costs; and 4) the company begins amortization capitalized software costs at the beginning of the following fiscal year.
The second task that needed to be finished was to forecast the income statement and the balance sheet for the next two years. We grew sales at a 15% rate, which is the stated rate from Koh. Also, in forecasting the balance sheet, we only showed debt financing for the capital expenditure of the DVD manufacturing equipment, which was the requested structure. Other relevant facts and assumptions for preparing the financial forecast are stated below-
Using the assumptions given in the case, all elements of income statement and balance sheet can be projected for next three years 2010, 2011 and 2012. Sales cycle of the products of the company is such that sales of a particular product increases initially for few years and then starts to decline as the new
Analyzing the company’s performance compared to its historical figures is always useful; nevertheless, these historical figures can be also a very useful tool to forecast future ProForma figures. We usually start by forecasting future sales (based on an average increase in sales figure) and other balance sheet and income statement items are forecasted as percentage of sales, this percent is normally consistent from historically figures. A close look should be given to the company’s operations and plan for the coming year while making our assumptions and forecasted figures. Normally we should follow
3. Refer to the monthly sales forecasts given in the first Table. Assume that these amounts are realized and that the firm’s customers pay exactly as predicted.
After closely reviewing the financial and production data, our accounting team has found that your traditional cost allocation is faulty and misleading. The costs of products A and C were over allocated and products B and D were under allocated causing deceptive information on the true profits of the company. Also, product B appears to be
We have constructed pro forma financial statements based on the sales-driven estimates and interest and tax fixed burdens. The key determining factors to the accuracy of these projections are the assumptions made about revenue growth and the sales-driven accounts like cost of goods sold, current assets (viz., inventory). Also, assumptions about the company’s capital budgeting
these changes in their assumptions would do to the ROI of the proposal and it’s over all profitability. 2) Will the cost in new equipment be returned by an equivalent reduction in
Gainesboro had possessed the capacity to keep up its position as an industry pioneer in the CAD/CAM showcase. The case shows how expanded market passage and rivalry can make a difficult for organizations and put descending weight on profit. The outcome is that if an organization like Gainesboro is to have a battling chance they should be original and concocted items that test
The Following involves the analysis of the costing techniques followed by the company along with its Budgeting system. It also involves the Investment appraisal analysis for the given data.
This paper has several goals. First, the managerial accounting question to be analyzed is business strategy. Utilizing financial reports management is able to analyze forward-looking statements of FEDEX Corporation current expectations based on their 2005 10K form. The final goal is to establish qualified information relative to business strategy and accounting practices that will enable management’s business decision with reference to industry share, total