You have to create a financial report including balance sheet

Executive summary:

XYZ is a toy manufacturing organization, which produce four different type of toys such as A, B, C and D.

This particular study provides a detailed plan for acquiring and using financial and other resources over a specified period (three years 2014 – 2015 to 2016 – 2017). Subsequently based on the budgeted information income and loss statement and balance sheet for the next three years is also prepared. Finally, ratio analysis is also executed to assess the financial performance over this three year period. The results show that XYZ evidenced better performance during this three year period.

Table of Contents

.docx#_Toc388024077″>2.0 Assumptions:3

.docx#_Toc388024078″>3.0 Budgets:4

.docx#_Toc388024079″>3.1 Sales volume budget:4

.docx#_Toc388024080″>3.2 Cost for product:5

.docx#_Toc388024081″>3.3 Inventory Budget:5

.docx#_Toc388024082″>3.4 Debtor’s budget:6

.docx#_Toc388024083″>3.5 Cash budget:6

.docx#_Toc388024084″>3.6 Chart for cash budget:7

.docx#_Toc388024085″>4.0 Budgeted statement of financial performance:7

.docx#_Toc388024086″>5.0 Budgeted statement of financial position:8

.docx#_Toc388024087″>6.0 Ratios:9

.docx#_Toc388024088″>6.1 Profitability Ratios:9

.docx#_Toc388024089″>6.2 Efficiency ratios:10

.docx#_Toc388024090″>6.3 Liquidity ratios:11

.docx#_Toc388024091″>6.4 Capital structure or Solvency ratios:11

.docx#_Toc388024092″>6.5 Explanation of the ratios.11

.docx#_Toc388024093″>7.0 Conclusion:12

.docx#_Toc388024094″>Reference:13

2.0 Assumptions:

· Sales budget:

o Four items are sold at a same rate over the next three years;

o Selling price per unit during 2014 – 2015 will be $ 10, during 2015 – 2016 will be $ 15 and during 2016 – 2017 will be $ 18;

· Cost for product:

o Cost of raw materials $ 0.40 per pounds;

o Costs of labor $ 10.00 per hour

o Cost for manufacturing overhead $ 50.00 hour

o Required raw materials per unit is 5 pounds

o 5 pounds of material are required per unit of product

o Each unit produced requires 0.05 hour of direct labor

o Fixed cost during 2014 – 2015 will be $ 350000, during 2015 – 2016 will be $ 350000 and during $ 400000

o Management fully adjusts the workforce to the workload each month

o XYZ uses absorption costing in its budgeted income statement and balance sheet.

o Manufacturing overhead is applied to units of product on the basis of direct labor-hours.

o The company has no work in process inventories

· Inventory:

o Beginning inventory is $ 5000

· Debtor:

o Beginning debtors is $ 50000

o 85 % of the sales will be received during the month of sales;

· Cash budget:

o A line of credit is available at a local bank that allows the XYZ to borrow up to $75,000.

o All borrowing occurs at the beginning of the year, and all repayments occur at the end of the year.

o The interest rate is 1% per month.

o The company does not have to make any payments until the end of the year.

o XYZ Company desires a cash balance of at least $ 100,000 at the end of each month. The cash balance at the beginning of 2014 – 2015 was $ 40,000.

o No cash dividends are paid during the next three years

o Equipment purchases of $143,700 are scheduled for 2015 – 2016 and $48,800 for 2016 – 2017. This equipment will be installed and tested during the year and will not become operational until the end of the year, when depreciation charges will commence.

· Other assumptions:

o 5 % of the sales remain un collectable in each of the next three years

o Variable selling and administrative expenses is $0.05 per unit sold

o Fixed selling and administrative expenses is $ 30000 for the next three years

o 10 % of the sales will be the accounts receivable;

o Price of land over the next three years will be $ 400000

o Equipment during the financial year 2014 – 2015 is $ 1610000

o Accumulated depreciation for 2014 – 2015 will be $ 750000 and for 2015 – 2016 and 2016 – 2017 will be $ 841500

o Accounts payable during 2014 – 2015 will be $ 50000 during 2015 – 2016 it will be $ 75000 and during 2016 – 2017 it will be $ 100000

o Common stock over the next three years will be $ 200000

o Retained earnings during 2014 – 2015 will be $ 1685000, during 2015 – 2016 it will be $ 2938925 and during 2016 – 2017 it will be $ 4612050

3.0 Budgets:

3.1 Sales volume budget:

Sales Volume budget for XYZ for the next three years

2014 – 2015

2015 – 2016

2016 – 2017

Item A

25300

31100

37400

Item B

24900

29900

36000

Item C

24900

28800

31800

Item D

24900

28200

30800

Total Volume

100000

118000

136000

Sales revenue budget:

Sales Revenue budget for XYZ for the next three years

2014 – 2015

2015 – 2016

2016 – 2017

Volume

100000

118000

136000

Selling Price Per unit

$ 10.00

$ 15.00

$ 18.00

Sales Revenue

$ 1,000,000.00

$ 1,770,000.00

$ 2,448,000.00

3.2 Cost for product:

Cost for product per unit

2014 – 2015

2015 – 2016

2016 – 2017

Particulars

Quantity uses

Cost ($)

Total ($)

Quantity uses

Cost

Total

Quantity uses

Cost

Total

Raw materials @ pounds

5

$ 0.40

$ 2.00

5

$ 0.50

$ 2.50

5

$ 0.55

$ 2.75

Direct labor @ hours

0.05

$ 10.00

$ 0.50

0.05

$ 10.50

$ 0.53

0.05

$ 10.75

$ 0.54

Manufacturing overhead @ hours

0.05

$ 50.00

$ 2.50

0.05

$ 50.00

$ 2.50

0.05

$ 51.00

$ 2.55

Unit product cost

$ 5.00

$ 5.53

$ 5.84

Break even point (BEP):

2014 – 2015

2015 – 2016

2016 – 2017

Fixed Costs

$ 350,000.00

$ 350,000.00

$ 400,000.00

Selling price

$ 10.00

$ 10.00

$ 10.00

Variable costs

$ 5.00

$ 5.53

$ 5.84

Break Even Point (BEP)

70000

78300

96154

3.3 Inventory Budget:

Inventory budget of XYZ for next three years

2014 – 2015

2015 – 2016

2016 – 2017

Beginning inventory

$ 5,000.00

$ 4,500.00

$ 6,500.00

Production

$ 99,500.00

$ 120,000.00

$ 130,000.00

Budgeted sales

$ 100,000.00

$ 118,000.00

$ 136,000.00

Ending inventory

$ 4,500.00

$ 6,500.00

$ 500.00

3.4 Debtor’s budget:

Debtors budget of XYZ for next three years

2014 – 2015

2015 – 2016

2016 – 2017

Opening Debtor

$ 50,000.00

$ 13,500.00

$ 23,625.00

Credit Sales

$ 1,000,000.00

$ 1,770,000.00

$ 2,448,000.00

Total

$ 1,050,000.00

$ 1,783,500.00

$ 2,471,625.00

Cash Received

$ 1,036,500.00

$ 1,759,875.00

$ 2,439,225.00

Closing Debtors

$ 13,500.00

$ 23,625.00

$ 32,400.00

3.5 Cash budget:

Cash budget of XYZ for next three years

2014 – 2015

2015 – 2016

2016 – 2017

Cash balance, beginning

$ 40,000.00

$ 570,500.00

$ 1,669,425.00

Add receipts:

Cash collections

$ 1,036,500.00

$ 1,759,875.00

$ 2,439,225.00

Total cash available

$ 1,076,500.00

$ 2,330,375.00

$ 4,108,650.00

Less disbursements:

Direct materials

$ 200,000.00

$ 295,000.00

$ 374,000.00

Direct labor

$ 50,000.00

$ 61,950.00

$ 73,100.00

Manufacturing overhead

$ 250,000.00

$ 295,000.00

$ 346,800.00

Total disbursements

$ 500,000.00

$ 651,950.00

$ 793,900.00

Excess (deficiency) of cash available over disbursements

$ 576,500.00

$ 1,678,425.00

$ 3,314,750.00

Financing:

Borrowings

$ 50,000.00

$ 75,000.00

$ 75,000.00

Repayments

$ (50,000.00)

$ (75,000.00)

$ (75,000.00)

Interest

$ (6,000.00)

$ (9,000.00)

$ (9,000.00)

Total financing

$ (6,000.00)

$ (9,000.00)

$ (9,000.00)

Cash balance, ending

$ 570,500.00

$ 1,669,425.00

$ 3,305,750.00

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