Financial Statements For Microchip Computer Corporation
Financial Statements For Micro Chip Computer Corporation Attached Ans
Financial statements for Micro Chip Computer Corporation Attached. Answer questions 1 and 2 below based on the financial data. 1. Determine the year-to-year percentage annual growth in total net sales. 2. 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. 1. 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. 2. 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. Assignment Guidelines · Download the financial statements and consolidated statement of operations by clicking on the links above in the assignment description. · Analyze the statements and then answer the four questions listed in the assignment description. · Show all work including calculations and formulas. If applicable, provide a detailed explanation of how you used Microsoft Excel to arrive at your answers. · Organize your answers, mathematical calculations, and Microsoft Excel data into a Word document of 1–2 pages. Your submitted assignment (120 points) must include the following: · A double-spaced Word document of 1–2 pages that contains your answers to the four questions listed in the assignment description, any calculations you performed, and all formulae that were used. Also, provide your Excel data table(s) along with an explanation of how you arrived at your answers if applicable.
Paper For Above instruction
Introduction
The analysis of Micro Chip Computer Corporation’s financial statements provides vital insights into the company’s sales growth and forecasted financial performance. The assessment involves calculating the year-to-year percentage growth in total net sales, evaluating the company’s sales goal achievement, and forecasting future operations using the percentage sales method. These financial analyses are crucial for understanding the company's past performance and projecting future outcomes based on plausible assumptions.
Part 1: Year-to-Year Percentage Growth in Net Sales
To determine the annual growth rate in total net sales, one must analyze the financial statements for at least two consecutive years. Suppose the net sales in Year 1 were $X and in Year 2 were $Y. The formula for calculating the percentage change is:
\[
\text{Percentage Growth} = \frac{(\text{Net Sales Year 2} - \text{Net Sales Year 1})}{\text{Net Sales Year 1}} \times 100\%
\]
Applying this formula, if, for example, net sales increased from $10 million in 2007 to $11 million in 2008, the growth rate would be:
\[
\frac{11 - 10}{10} \times 100\% = 10\%
\]
This calculation needs to be repeated for each pair of consecutive years to establish the trend, allowing a clear picture of year-to-year growth. Based on the actual data, the percentage change might be, for instance, 12% between 2007 and 2008, and 8% between 2008 and 2009, illustrating variability in growth rates.
Part 2: Evaluating the Company’s Sales Goal for 2009
The company set a sales growth goal of +10% for 2009. After calculating the actual percentage growth, compare it with the target to assess achievement. For instance, if an actual growth of 9% is observed, then the company did not meet its goal. The target revenue figure can be calculated as:
\[
\text{Target Revenue} = \text{Previous Year Revenue} \times (1 + 10\%)
\]
If the 2008 revenue was $11 million, the target for 2009 would be:
\[
11\, \text{million} \times 1.10 = 12.1\, \text{million}
\]
If the actual revenue for 2009 is below $12.1 million, the company did not achieve its sales goal. This analysis hinges on precise calculations from the financial data and provides a measure of the company’s success in revenue growth.
Part 3: Forecasting Future Operations Using Percentage Sales Method
For the forecasting exercise, assume the net sales increase by 25%. Starting with the 2008 sales figure, the forecasted sales are:
\[
\text{Forecasted Sales} = \text{2008 Sales} \times 1.25
\]
Next, adjust the forecasted sales for tax and restructuring costs. With a tax rate of 15%, the after-tax profit related to restructuring costs (which are 5% of the new sales) needs to be calculated.
Restructuring costs:
\[
\text{Restructuring Cost} = \text{Forecasted Sales} \times 5\%
\]
Tax on restructuring:
\[
\text{Tax on Restructuring} = \text{Restructuring Cost} \times 15\%
\]
The adjusted forecasted financials, considering restructuring costs and taxes, provide a more accurate picture of expected net income and operational costs for 2009.
Discussion of Results and Assumptions
The main assumptions include that sales will increase uniformly by 25%, restructuring costs are fixed at 5%, and the tax rate remains at 15%. These assumptions, while simplifying, may not reflect real-world variability. For example, market conditions could impact sales growth unpredictably; restructuring costs may be higher or lower, and tax policies might change.
An unreasonable assumption might be the steady 25% sales increase, as actual sales growth often fluctuates based on industry cycles, economic factors, and competitive dynamics. Additionally, assuming that restructuring costs are precisely 5% of sales could be overly optimistic or pessimistic, depending on operational efficiencies and strategic initiatives.
Conclusion
Analyzing Micro Chip’s financial statements illustrates the importance of utilizarion of percentage growth calculations and forecasting models to project future company performance. While the assumptions made facilitate straightforward analysis, cautious interpretation is necessary, particularly considering potential fluctuations in sales growth, restructuring costs, and taxation. Continuous financial monitoring and flexible forecasting are essential for strategic decision-making.
References
- Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.). Cengage Learning.
- Gibson, C. H. (2021). Financial Reporting & Analysis (13th ed.). Cengage Learning.
- Higgins, R. C. (2018). Analysis for Financial Management (12th ed.). McGraw-Hill Education.
- Penman, S. H. (2013). Financial Statement Analysis and Security Valuation. McGraw-Hill/Irwin.
- Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2020). Financial Statement Analysis (12th ed.). McGraw-Hill Education.
- Investopedia. (2023). The Percentage Sales Method of Forecasting. Retrieved from https://www.investopedia.com/terms/p/percentage-sales-method.asp
- Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (16th ed.). Wiley.
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- Financial Accounting Standards Board (FASB). (2022). Statement of Financial Accounting Concepts No. 8 – Notes to Financial Statements.
- U.S. Securities and Exchange Commission (SEC). (2023). Financial Reporting Manual. Retrieved from https://www.sec.gov/