FIN 317 – HOMEWORK 7 You are given comparative income statements and balance sheets for Best Buy (in millions). Based on the given forecasting assumptions, prepare forecasted income statement, balance sheet, and cash flow statement for year 3. (Show your calculation lik

FIN 317 – HOMEWORK 7

You are given comparative income statements and balance sheets for Best Buy (in millions). Based on the given forecasting assumptions, prepare forecasted income statement, balance sheet, and cash flow statement for year 3. (Show your calculation like A/B=C or (A+B)/C=D etc. in given cells).

  1. PROJECTED INCOME STATEMENT (30 points)

 

Best Buy Income Statement      
($ in millions) Forecasting step Year 3 Estimate Year 2 Year 1
Net sales 15,326 12,494
Cost of goods sold 12,267 10,101
Gross profit 3,059 2,393
Selling, general and administrative expense 2,251 1,728
Depreciation and amortization expense 167 103
Income before tax 641 562
Income tax expense 245 215
Net income   396 347

 

 

Forecasting assumptions (income statement)
Sales growth 0.2267
Gross profit margin 0.1996
Selling, general and administrative expense/sales 0.1469
Depreciation expense/Gross prior year PPE 0.1528
Income tax expense/pretax income 0.3822

 

  1. PROJECTED BALANCE SHEET (40 points)
Best Buy Balance Sheet  
($ in millions) Forecasting step Year 3 Estimate Year 2 Year 1
Cash 746 751
Receivables 313 262
Inventories 1,767 1,184
Other current assets 102 41
Total current assets   2,928 2,238
PPE 1,987 1,093
Accumulated depreciation 543 395
Net PPE 1,444 698
Other assets 466 59
Total assets     4,838 2,995
Accounts payable 2,473 1,704
Short term debt and current portion of long-term debt 114 16
Income tax liabilities 127 65
Total current liabilities   2,714 1,785
Long-term debt 303 115
Total long-term liabilities   303 115
Common stock 20 20
Additional paid in capital 576 247
Retained earnings 1,225 828
Shareholders’ Equity   1,821 1,095
Total liabilities and SHs’ Equity     4,838 2,995

 

 

 

 

 

 

 

Forecasting assumptions (balance sheet)
Accounts receivable turnover rate 48.96
Inventory turnover rate 6.94
Other current assets no change
CAPEX (in millions) 1,262
Other assets no change
Accounts payable turnover rate 4.96
Short term debt and current portion of LT debt no change
Taxes payable/tax expense 0.5184
Long term debt 189
Common stock no change
Additional paid in capital no change
Dividend payments 0

 

  1. CASH FLOW STATEMENT PREPARATION (10 points)

Based on your forecasted balance sheet and income statement, in order to be able to prepare forecasted cash flow statement in the next step, for relevant accounts, calculate changes from Year 2 to Year 3, state whether those changes are cash inflow or outflow, and categorize them as operating, financing or investing activities (write your answers in the corresponding cells for relevant accounts).

Best Buy Projected Statement of Cash Flows
($ in millions) Year 3 Estimate Year 2 Change from Year 2 to Year 3 cash inflow or outflow operating, investing or financing
Cash 746
Receivables 313
Inventories 1,767
Other current assets 102
Total current assets   2,928  
PPE 1,987
Accumulated depreciation 543
Net PPE 1,444
Other assets 466
Total assets   4,838  
Accounts payable 2,473
Short term debt and current portion of long-term debt 114
Income tax liabilities 127
Total current liabilities   2,714  
Long-term debt 303
Total long-term liabilities   303  
Common stock 20
Additional paid in capital 576
Retained earnings 1,225
Shareholders’ Equity   1,821  
Total liabilities and SHs’ Equity   4,838  
  1. PROJECTED CASH FLOW STATEMENT (20 points)

Prepare the projected cash flow statement of Best Buy Company for Year 3. (write your answers in the corresponding cells) (there are more cells than you need).

Best Buy Projected Statement of Cash Flows  
($ in millions)  
Net income
Items to adjust income to cash flows
Net cash flow from operations  
   
Net cash flow from investing activities  
Net cash flow from financing activities  
Net change in cash
Beginning cash
Ending cash

 

Reference no: EM132069492

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