Finance

Question 1 part 1

The year-to-year percentage annual growth in net sales is given in the following table.
20042005200620072008projected 2009Net sales11,062 11,933 9,181 6,141 8,334 9,167.4Change0.07874 (0.23062)(0.33112)0.35711 0.10  Change7.87 (23.06)(33.11)35.71 10

Explanation
 change  (New figure- old figure)  (old figure)  100
For e.g. (11,933-11,062)11,062 0.7874 x 100 7.87

Question 1- Part 2
The projected net sales figure for the Financial Year (FY) 2009 is calculated by multiplying net sales figure of FY 2008 with 1.1, because the expected growth rate is 10, therefore, 8,334 x 1.1 9,167. Micro Corporation revenue has had a growth rate of 7.87 in FY 2005 which dropped down by 23.06 in 2006 and 33.11 in 2007. However, in the year 2008, the sales increased by 35.71 which is commendable. This rise in net sales from FY 2007 to 2008 can be attributed to the 16.49  in increase total assets. Moreover, assets turnover has increased from 1.13 to 1.6 along with a rise in Return on Asset from 9.8 to 13.2. Hence, the company increased its investments in assets which helped generate more sales. Keeping this observation in mind, I believe that Micro Chip Corporation would be able to achieve their target of having 10 growth rate in the FY 2009, because they will have enough support from their asset base to generate the required level of sales.

Question 2- Part 1
 07-08of salesforecastedSales8,334.00          10,001 Cost of Sales5,458.00 0.656,550 Gross Margin2,876.00 3,451 Operating expensesR  D525.00 0.06 630 S,G A691.00 0.08 829 In process R  D         Restructuring costs200          Total Operating Exp1,216.00 1,659 Operating income1,660.00 1,792 Total interest and other Income net194.00 194 Income before provision for Income taxes1,854.00 1,598 Provision for income Taxes (15)278.10 240 Net income1,575.90 1,358 Explanations for calculation
I calculated the new sales figure by multiplying 8,334 with 1.2 (20 increase)
I then calculated the percent of sales for cost of sales by simply dividing the cost of sales with the sales figure. The same was repeated for RD, S GA expenses.
Calculated the restructuring cost by multiplying 10,001with 0.02
Did not change the interest figure.
The rest of the figures in income statement were calculated in the regular manner.

Question 2-Part 2
The projected sales figures for 2009 calculated in question 1 is 9,164 where as in question 2 the new sales figure with a 20 growth rate is 10,000. The companys financials show that assets have been increased by 46 therefore, I believe that Microchip Corporation can achieve its target of 20 increase in sales, primarily because the increased investment in assets will help generate more sales. However, the company must control its expenses because analysis of the projected statement of operations highlights the fact that if cost and expenses will not be controlled the profit margin will decline from 19 to 13.5.

Part 2
Calculate the following asset activity ratios for the end of 2005 1. Average Collection Period  receivables  sales 365 (Brigham, 1997)
55.514  2004.016  365
10.11 days or 10 days
2. Inventory Turnover  cost of goods sold  inventory (Brigham, 1997)
1446.733  141.35
10