Flash Memory
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Flash INC. CASE ANALYSIS
Comparative Financial Analysis
Author
Assuming the company does not invest in the new product line; prepare forecasted income statements and balance sheets at year-end 2010, 2011, and 2012. Based on these forecasts, estimate Flash's required external financing: in this case all required external financing takes the form of additional notes payable from its commercial bank, for the same period.
Using the assumptions given in the case, all elements of income statement and balance sheet can be projected for next three years 2010, 2011 and 2012. Sales cycle of the products of the company is such that sales of a particular product increases initially for few years and then starts to decline as the new technology introduced by the competitors renders that particular product obsolete. The current product mix of the company is in such a stage currently that it has been estimated that sales of the company will increase significantly for the next two years and then stay the same for the third year. Net Sales for next three years have been estimated as $120 million, $144 million and $144 million. Cost of goods sold has been estimated to be 81.10% of sales for next three years. Thus, COGS values for years 2010, 2011 and 2012 come out to be $97.32 million, $116.784 million and $116.784 million. Another way to calculate the gross margin for next three years is just to take 19.9% of sales for all the three years. Research and development costs are expected to remain almost the same for next few years to come. Thus, it is safe to assume that R&D costs will be 5% of the net sales of the company. These values for next three years come out to be $6 million, $7.2 million and $7.2 million respectively. Selling general and administrative expenses are highly correlated to sales of the company and therefore, it is safe to assume that these expenses are a certain percentage of sales figures for next three years. It has been estimated that SG&A
Flash INC. CASE ANALYSIS
Comparative Financial Analysis
Author
Assuming the company does not invest in the new product line; prepare forecasted income statements and balance sheets at year-end 2010, 2011, and 2012. Based on these forecasts, estimate Flash's required external financing: in this case all required external financing takes the form of additional notes payable from its commercial bank, for the same period.
Using the assumptions given in the case, all elements of income statement and balance sheet can be projected for next three years 2010, 2011 and 2012. Sales cycle of the products of the company is such that sales of a particular product increases initially for few years and then starts to decline as the new technology introduced by the competitors renders that particular product obsolete. The current product mix of the company is in such a stage currently that it has been estimated that sales of the company will increase significantly for the next two years and then stay the same for the third year. Net Sales for next three years have been estimated as $120 million, $144 million and $144 million. Cost of goods sold has been estimated to be 81.10% of sales for next three years. Thus, COGS values for years 2010, 2011 and 2012 come out to be $97.32 million, $116.784 million and $116.784 million. Another way to calculate the gross margin for next three years is just to take 19.9% of sales for all the three years. Research and development costs are expected to remain almost the same for next few years to come. Thus, it is safe to assume that R&D costs will be 5% of the net sales of the company. These values for next three years come out to be $6 million, $7.2 million and $7.2 million respectively. Selling general and administrative expenses are highly correlated to sales of the company and therefore, it is safe to assume that these expenses are a certain percentage of sales figures for next three years. It has been estimated that SG&A