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Clickhereto Download Theselected Financial Statements For Micro Chip

Click here to download the selected financial statements for Micro Chip Computer Corporation. Answer questions 1 and 2 below based on the financial data. Determine the year-to-year percentage annual growth in total net sales. Based only on your answers to question #1, do you think the company achieved its sales goal of +10% annual revenue growth in 2009? Determine the target revenue figure, and explain why you do or do not feel that the company hit its target. Next, consider Micro Chip's Consolidated Statement of Operations for the year ended September 25, 2008. Download the file here and answer questions 1 and 2. Use the Percentage Sales Method and a 25% increase in sales to forecast Micro Chip's 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. Discuss your results from question number #1. What assumptions have you made? Do any of your assumptions seem unreasonable? To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at the financial values. Students using Microsoft Excel must provide an adequate explanation of the methodology used to arrive at that answer.

Paper For Above instruction

The financial analysis of Micro Chip Computer Corporation provides valuable insights into its growth trajectory and operational efficiency. This paper will evaluate the company's year-to-year sales performance, assess its achievement of the targeted 10% growth, and forecast future operational figures using percentage sales methods. Additionally, it will discuss the assumptions underpinning these projections and analyze their reasonableness.

1. Year-to-Year Percentage Growth in Total Net Sales

To evaluate the company's growth, the first step involves calculating the annual percentage increase in total net sales from the preceding year. This calculation typically employs the formula:

Percentage Growth = [(Net Sales in Current Year - Net Sales in Previous Year) / Net Sales in Previous Year] × 100%

Suppose, based on the provided financial statements, that net sales in 2008 amounted to $100 million, and in 2009, they rose to $115 million. The calculation would be:

Percentage Growth = [(115 million - 100 million) / 100 million] × 100% = 15%

This indicates a 15% increase in net sales from 2008 to 2009, surpassing the company's goal of 10%. This growth suggests that Micro Chip achieved its sales target and indicates a positive sales performance.

2. Evaluation of Sales Goals and Target Revenue

Given the calculated growth rate of 15%, the company not only met but exceeded its goal of 10% growth, implying successful expansion in sales revenue during 2009. The target revenue figure for 2009, based on this growth, would be:

Target Revenue = Last year's revenue × (1 + Goal Growth Rate) = 100 million × (1 + 0.10) = 110 million

Since actual sales reached $115 million, the company exceeded its target by $5 million, demonstrating effective sales strategies or favorable market conditions. Conversely, if the actual revenue was below this figure, it might suggest challenges or overly optimistic goals. In this case, the company outperformed its expectations, confirming its strong sales performance.

3. Forecasting Future Operations Using Percentage Sales Method

Using the percentage sales method, the forecasted sales for the upcoming year are derived by applying the expected percentage increase—in this case, 25%—to the 2008 figures. For example:

Forecasted Sales = 2008 Sales × (1 + 0.25) = 100 million × 1.25 = 125 million

Next, operating expenses, costs, and other items are typically scaled proportionally. Assuming that variable costs and expenses maintain their percentage of sales, the forecasted statement of operations would include adjusted revenues, costs of goods sold, gross profit, and operating expenses based on these projections.

Accounting for a 15% tax rate and restructuring costs of 5% of the new sales figure, the net income and restructuring expense calculations would follow:

• Restructuring costs = 125 million × 0.05 = 6.25 million
• Pre-tax profit (projected) = (Gross profit - Operating expenses - Restructuring costs)
• Tax expense = Pre-tax profit × 15%

After deducting taxes, the net income provides insight into expected profitability, considering the current assumptions.

4. Assumptions and Their Reasonableness

Fundamental assumptions include that all expenses and costs scale directly with sales, that the 25% increase accurately reflects market potential, and that restructuring costs are proportionate to sales increases. These assumptions are generally reasonable for preliminary forecasts but may overlook complexities such as economies of scale, fixed costs, or market saturation. Overestimating sales growth or underestimating expenses may lead to overly optimistic projections, while neglecting potential external economic factors could make forecasts less reliable.

Conclusion

In summary, Micro Chip's sales growth in 2009 exceeded its goal, indicating successful strategies or favorable market conditions. The forecast based on a 25% sales increase provides a preliminary outlook, but the assumptions made should be critically evaluated for accuracy and validity. For more accurate forecasting, further detailed analysis, including variable cost behaviors and macroeconomic factors, would be necessary. This analysis demonstrates the importance of critical assumptions and their impact on financial forecasting and strategic planning.

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