Chapter 10
Forecasting Financial Statements
10-80
in whole or in part.
Exhibit 10.Q
Massachusetts Stove Company
Projected Financial Statement Ratios under Best-Case Scenario
(Case 10.2)
MASS. STOVE Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
Financial Ratios Actual Projected Projected Projected Projected Projected
Profit Margin for ROA 6.76% 6.30% 4.96% 5.76% 7.53% 9.23%
Assets Turnover 1.94 1.86 1.85 1.93 1.94 1.88
Return on Assets 13.14% 11.71% 9.19% 11.13% 14.60% 17.36%
Profit Margin for ROCE 5.65% 5.32% 4.09% 5.05% 6.94% 8.75%
Capital Structure Lev. 2.96 2.40 2.13 1.95 1.78 1.62
Return on Share. Equity 32.56% 23.70% 16.17% 19.04% 23.98% 26.68%
Chapter 10
Forecasting Financial Statements
10-81
in whole or in part.
Exhibit 10.R
Massachusetts Stove Company
Projected Income Statements under Most Likely Scenario
(Case 10.2)
MASS. STOVE Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
Income Statement Actual Projected Projected Projected Projected Projected
Sales:
Woodstoves 2,734,986 2,680,286 2,626,681 2,574,147 2,522,664 2,472,211
Gas Stoves — — 107,211 323,779 549,137 783,898
Total Sales 2,734,986 2,680,286 2,733,892 2,897,926 3,071,801 3,256,109
Cost of Good Sold (1,380,820) (1,340,143) (1,366,946) (1,448,963) (1,535,901) (1,628,055)
Depreciation (72,321) (75,654) (104,654) (133,654) (137,821) (141,988)
ASSUMPTIONS
Sales Growth:
Woodstoves –0.02 –0.02 –0.02 –0.02 –0.02
Gas Stoves 0 0.04 0.08 0.08 0.08
Total Sales –0.02 0.02 0.06 0.06 0.06
Cost of Goods Sold/Sales 0.5 0.5 0.5 0.5 0.5
Chapter 10
Forecasting Financial Statements
10-82
in whole or in part.
Exhibit 10.S
Massachusetts Stove Company
Projected Balance Sheets under Most Likely Scenario
(Case 10.2)
MASS. STOVE Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
Balance Sheet Actual Projected Projected Projected Projected Projected
Assets
Cash 351,588 398,622 395,502 531,440 709,950 929,961
Accounts Receivable 5,997 5,877 5,995 6,354 6,736 7,140
Liabilities and Sh. Eq.
Accounts Payable 47,809 46,853 47,790 50,657 53,697 56,919
Cur. Portion—L.T. Debt 27,036 29,200 31,400 33,900 36,600 39,500
Other Current Liabilities 257,252 252,107 257,149 272,578 288,933 306,269
Total Current Liabilities 332,097 328,160 336,339 357,135 379,229 402,687
ASSUMPTIONS
Cash Statement of Cash Flows
Accounts Receivable Growth Rate of Sales
Accounts Payable Growth Rate of Inventories
Cur. Portion—L.T. Debt Given in Case
Contributed Capital No Change
Chapter 10
Forecasting Financial Statements
10-83
in whole or in part.
Exhibit 10.T
Massachusetts Stove Company
Projected Statements of Cash Flows under Most Likely Scenario
(Case 10.2)
MASS. STOVE Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
State. of Cash Flows Actual Projected Projected Projected Projected Projected
Operations
Net Income (Prelim) 154,601 122,078 60,630 56,753 87,693 121,363
Depreciation 72,321 75,654 104,654 133,654 137,821 141,988
Deferred Taxes 909 0 0 0 0 0
Investing
Capital Expenditures (22,921) (140,000) (150,000) (30,000) (25,000) (25,000)
Cash Flow from Invest. (22,921) (140,000) (150,000) (30,000) (25,000) (25,000)
Financing
Chapter 10
Forecasting Financial Statements
10-84
in whole or in part.
Exhibit 10.U
Massachusetts Stove Company
Projected Financial Statement Ratios under Most Likely Scenario
(Case 10.2)
MASS. STOVE Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
Financial Ratios Actual Projected Projected Projected Projected Projected
Profit Margin for ROA 6.76% 6.07% 3.68% 3.36% 4.31% 5.26%
Assets Turnover 1.94 1.80 1.75 1.79 1.81 1.80
Chapter 10
Forecasting Financial Statements
10-85
in whole or in part.
Exhibit 10.V
Massachusetts Stove Company
Projected Income Statements under Worst-Case Scenario
(Case 10.2)
MASS. STOVE Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
Income Statement Actual Projected Projected Projected Projected Projected
Sales:
Woodstoves 2,734,986 2,625,587 2,520,563 2,419,741 2,322,951 2,230,033
Gas Stoves — — 52,512 153,334 250,124 343,042
Total Sales 2,734,986 2,625,587 2,573,075 2,573,075 2,573,075 2,573,075
Cost of Good Sold (1,380,820) (1,312,793) (1,286,537) (1,286,537) (1,286,537) (1,286,537)
Depreciation (72,321) (75,654) (112,654) (149,654) (153,821) (157,988)
ASSUMPTIONS
Sales Growth:
Woodstoves –0.04 –0.04 –0.04 –0.04 –0.04
Gas Stoves 00.020.040.04 0.04
Total Sales –0.04 –0.02 0 0 0
Cost of Goods Sold/Sales 0.5 0.5 0.5 0.5 0.5
Chapter 10
Forecasting Financial Statements
10-86
in whole or in part.
Exhibit 10.W
Massachusetts Stove Company
Projected Balance Sheets under Worst-Case Scenario
(Case 10.2)
MASS. STOVE Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
Balance Sheet Actual Projected Projected Projected Projected Projected
Assets
Cash 351,588 354,615 269,816 318,168 354,773 374,005
Accounts Receivable 5,997 5,757 5,642 5,642 5,642 5,642
Inventories 452,709 434,601 425,909 425,909 425,909 425,909
ASSUMPTIONS
Cash Statement of Cash Flows
Accounts Receivable Growth Rate of Sales
Accounts Payable Growth Rate of Inventories
Cur. Portion—L.T. Debt Given in Case
Chapter 10
Forecasting Financial Statements
10-87
in whole or in part.
Exhibit 10.X
Massachusetts Stove Company
Projected Statements of Cash Flows under Worst-Case Scenario
(Case 10.2)
MASS. STOVE Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
State. of Cash Flows Actual Projected Projected Projected Projected Projected
Operations
Net Income (Prelim) 154,601 115,776 7,976 (50,107) (70,034) (89,835)
Depreciation 72,321 75,654 112,654 149,654 153,821 157,988
Investing
Capital Expenditures (22,921) (180,000) (190,000) (30,000) (25,000) (25,000)
Cash Flow from Invest. (22,921) (180,000) (190,000) (30,000) (25,000) (25,000)
Financing
Chapter 10
Forecasting Financial Statements
10-88
in whole or in part.
Exhibit 10.Y
Massachusetts Stove Company
Projected Financial Statement Ratios under Worst-Case Scenario
(Case 10.2)
MASS. STOVE Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
Financial Ratios Actual Projected Projected Projected Projected Projected
Profit Margin for ROA 6.76% 5.93% 1.74% –0.59% –1.37% –2.17%
Assets Turnover 1.94 1.77 1.69 1.74 1.85 1.99
Return on Assets 13.14% 10.50% 2.95% –1.04% –2.53% –4.33%
Profit Margin for ROCE 5.65% 4.89% .73% –1.55% –2.27% –3.00%
Capital Structure Lev. 2.96 2.41 2.20 2.17 2.21 2.29