Question

need some help filling out my balance and income statement using the following information given.

Using a Percentage of Sales method from 2017 results and the Given Information below, derive the 2018 Pro Forma (forecast) Income Statement and Balance Sheet (i.e. fill in the 2018 cells with the appropriate amounts).

Is there a “plug” needed? If so, how much is it? What does it tell you about Scarlet’s forecasted 2018 financial projections and what could Scarlet do to remedy the situation?

Based on Scarlet’s 2017 & 2016 financials, what is her business’s Sustainable Growth Rate (SGR)?

Given Information:

Scarlet believes that her 2018 Revenue figure will be 12% higher than her 2017 Revenue.

She estimates that her SG&A will go up by $1,000 from 2016-2017 since she plans on getting a part-time employee.

She doesn’t intend to pay any dividends for 2018.

For her Balance Sheet forecasted items she uses only 2017 results, rather than taking an average of the results (average of the % of sales) from 2016 and 2017.

Scarlet assumes Interest Expense, Curr Portion of LT Debt, and Bank Loan Payable will remain the same in 2018 as they were in 2017.

Scarlet plans on issuing $1,000 of (new) Common Stock in 2018.

Scarlet determines that she will need to spend $3,700 for a new Lemon Press machine, which will be her entire CAPEX for 2018. We will assume depreciation will be $200 for this item for 2018, and the yearly depreciation/amortization expense for the rest of Scarlet’s PPE will remain the same as it was in 2017 (and assume no asset sales were made in 2017).

Intangibles and Goodwill will remain unchanged in 2018.

She is not planning on disposing of any of her assets (i.e. no asset sales).

Income Statement
	2018	2017
Sales / Revenue	46,592	41,600
Cost of Goods Sold (COGS)	?	24,960
Gross Profit	?	16,640
Selling, General & Administrative (SG&A)	13,940	12,940
Operating Profit	?	3,700
Interest Expense	?	2,000
Income Before Taxes	?	1,700
Income Tax Expense	?	595
Net Income	?	1,105
Assume No Dividends Paid

Balance Sheet
Assets					Liabilities and Stockholders' Equity
Current Assets:	2018	2017	2016		Current Liabilities:	2018	2017	2016
Cash	?	2,500	5,495		A/P	?	1,100	300
A/R	?	800	1,300		Deferred Revenue	?	700	1,000
Inventory	?	2,900	1,600		Curr Portion of LT Debt	?	2,200	5,300
Prepaid Rent	?	2,200	1,800		Wages Payable	?	2,600	4,600
Prepaid Insurance	?	1,400	1,900		Tot Curr Liab	?	6,600	11,200
Tot Curr Assets	?	9,800	12,095
					LT Liab
LT Assets					Bank Loan Payable	?	5,500	3,300
PPE, Gross	?	9,500	5,500		Tot Liab	?	12,100	14,500
Accumul Depr	?	2,800	2,000
PPE, Net	?	6,700	3,500		Stockholders' Equity
					Common Stock	4,300	3,300	1,100
Intangibles	?	3,000	3,000		Retained Earnings	?	5,100	3,995
Goodwill	?	1,000	1,000		Total Stockholders' Equity	?	8,400	5,095
Total Assets	?	20,500	19,595		Total Liab + Stockholders' Equity	?	20,500	19,595
			2a.		PLUG (if necessary):	?
					What it tells you:	?
			2b.		Sustainable Growth Rate (SGR):	?