![]() The rest of the shark's investment value is added to this account. The stock received by the shark, worth $26,000 (at Par value of $1 per share), is already reflected under Common Stock. 19 CAPITAL PAID IN EXCESS OF PAR: The shark's full investment of $1M must be reflected on the Balance Sheet. 18 COMMON STOCK ($1 Par): Increase by the dollar value of shares issued to sharks (26,000 shares at $1 par). 17 LONG-TERM LIABILITIES: Pay down $100,000 of old debt every year starting in 2023. Find Total Current Liabilities and Accrued Expenses first, and then you can solve for Accounts Payable.) 16 ACCRUED EXPENSES: Use the 3-year average Percent-of-Sales method to forecast. (HINT: The Current Ratio will help you forecast TOTAL Current Liabilities, not Accounts Payable. 15 ACCOUNTS PAYABLE: Use the 3-year average Current Ratio to forecast. (All capital expenditures are assumed to occur on January 1st of the year of purchase, and no equipment is sold or salvaged during the forecasted period.) 14 ACCUMULATED DEPRECIATION: Each year, 10% of the total amount of Plant and Equipmentis added to the depreciation amount. 13 PLANT & EQUIPMENT: There is a new capital expenditure of $750,000 dollars in 2023, paid for from the $1M in funding from the sharks, rather than with new debt. This is demonstrated in your Week 2 Lesson!) 12 INVENTORY: Compute a 3-year average of inventory as a Percent-of-Sales, and then use that figure to forecast inventory levels through 2027. Plug your Average RTO into the RTO formula for each future year, along with your other known number from your financial statements, to find your forecasted Accounts Receivable amounts. (HINT: Find the formula for Receivables Turnover (RTO) in your Week 2 Chapter readings, and solve for RTO for each of 2020, 2021, and 2022. ![]() 11 ACCOUNTS RECEIVABLE: Use a 3-year average Receivables Turnover ratio to forecast. 10 MARKETABLE SECURITIES: Plan to keep Marketable Securities at 60% of Cash levels. ![]() 9 CASH: Increases to $50,000 in 2023 and stays at that level. However, you’ll quit that job IF the sharks fund you!) 8 SHARES: Issued 26,000 $1-par shares to the sharks for a 25% ownership stake. (NOTE: If the taxes shown for 2020-2022 seem high, it’s because you had income from another job that threw your LLC income into a slightly higher tax bracket. Because of this, use 36% as your effective tax rate. Also, in 2022, higher tax rates were passed for the 2023 tax year, pushing income over $400,000 into the 39.6% tax bracket. You do, however, still have to pay Federal taxes. 7 TAXES: Because you live in a business-friendly State (Wyoming), you don’t have to pay state taxes on your LLC’s income. ![]() 6 INTEREST EXPENSE: This is a Fixed cost, and is 10% of Long-term Liabilities. 5 DEPRECIATION EXPENSE: Depreciation expense is a fixed cost in the amount of 10% of Plant & Equipment each year. Use the resulting average S&A Percent-of-Sales to forecast S&A into the future.) 4 RENT EXPENSE: Rent expense is a fixed cost in the amount of $15,000 per year in 2020-2022, increasing to $200,000 per year in 2023. (HINT: Find what percent S&A expense is for each of 2020, 2021, and 2022, and average the 3 results together. 3 SELLING & ADMINISTRATIVE EXPENSE: Use a 3-year average Percent-of-Sales to forecast S&A expenses. 2 All the following are complete by March 31, 2023: 1) your shark funding has been received, 2) new capital investments have been purchased and set up, and 3) additional labor has been hired and trained. 1 The Sharks gave you the $1,000,000 in funding you requested in exchange for 25% ownership of your company’s profits. Should I total all 2021, 2022, 2023, then divide by three? I'm totally lost here ASSUMPTIONS NOTE: You will use a combination of Proforma, Ratios, and the Percent-of-Sales methods to create your forecasted financials. How to work the selling and administration expenses from this assumptions. ![]()
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