Finance

Paige Brown

Unit 2 Individual Project

1)The year- to year percentage annual growth in net sales for Micro Chip Computer Corporation was done in the following manner:

The sales numbers are in millions.

2004- 2003 = 8,334-6,141 = 2,193 = .35710796 = 35.7%

2003 6,141 6,141

2003- 2002 = 6,141-9,181 = 3040 = - .331186145 = - 33.1%

2002 9,181 9,181

2002- 2001 = 9,181- 11,933 = 2752 = -.2206209671 = - 22.06%

2001 11,933 11,933

2001- 2000= 11,933- 11,062 = 871 = .0787380221 = 7.8%

2000 11,062 11,062

2) Do I think the company will hit its sales goal of +10 % annual revenue growth in 2005?

No I do not.

The following is how I came to this conclusion.

10% annual growth of 8,334,000 is times .10= 833,400. $8,33400 + 833,400=

These numbers added together give a target revenue for 2005 of $9,167,400.

To find the average % annual growth I added all of the percentages together while they were still in decimal form and then divided them by four and then converted them into a percentage.

As follows: .35710796 + (- .331186145) + (-.2206209671) + .0787380221= -.11596113

-.11596113/ 4= -.0289902825= -2.9%

The average annual growth between 2000 and 2004 is -2.9%

This means that the growth showed a negative 2.9% decrease in target revenue.

I do not feel the company will hit their target revenue figure. They must increase their annual growth not decrease it.

After calculating a 2.9% decrease to the total net sales for 2004, the projected revenue figure based on past events for 2005 is 8,334,000 * .0289902825= 241,605.0144

8,334,000-241,605.0144= $8,092,394.986

The projected target revenue for 2005 is $8,092,395.

Based on this information I do not think they will make their projected target of $9,167,400 based on the average year to year % annual growth. They will miss it by $1,075,005 million.

Part 2:

Consider Micro Chip’s Consolidated Statement of operations for the year ended September 25, 2004.

1)

Income statement end of Sept 2004

Sales revenue $8,334.00

Less: Cost of Goods sold $5,458.00

Gross Profits $2,876.00

Less: Operating expenses $1,216.00

Operating Profits $1,660.00

Less: Interest Expense $ 194.00

Net Profits before taxes $1,854.00

Less: Taxes (15%) $278.00

Net Profit after taxes $1,575.00

Income Statement Pro-Forma Sept 2005

Sales revenue $10,000.8

Less: Cost of Goods sold(.655) $6,549.5