Module 04 Course Project-Twelve Month Pro Forma Budgeted Income Statement Considering your Cloud Ware Company, compare the November ending Profit and Loss Statement with the end of December Profit and Loss statement. This work should be done in Excel. Compare the November Balance Sheet with the balance sheet as of December 31st. After analyzing the statements, answer the following questions: What is the financial situation of the company as of November 30? Did the financial situation improve, remain the same, or start to decline through the month of December? What areas of strength exist in the company? What are the company\'s weaknesses? What are some areas where the company has opportunities for growth for the company\'s financial situation? To help you justify the above answers, financial ratios should be calculated. At minimum, the following ratios should be calculated and used to support your arguments: Debt to Equity Ratio (Total Liabilities/Equity) This ratio provides a look at how much the creditors have put into the company compared to how much the owners have put into the company current Ratio Current Assets/Current Liabilities current liabilities. This provides a look at whether the business has enough arrent assets to pay their Profit Margin (Net Income/Sales) This provides a measure of how much profit is earned on each dollar of sales. You have decided to request a bank loan to expand your Cloud Ware business and the lender has asked for a one-year projection of revenue and expenses. To request the loan, you will need to create a Pro Forma one yeaf budgeted income statement broken down over 12 months. You will need to look at the actual ending financial statements for October, Novembeh, and December and use this data to help create the forecast for the next fiscal year of business. Using financial ratios will be critical in supporting your argument for the loan and be aware that most bankers or lenders will not even consider a loan prospect without addressing, for example, the impact of additional debt on your debt to equity ratio. Note: Excel must be used for creating the analysis and budget and must include formulas for all mothematical calculations including addling subtracting and sums of columns or groups of cells Submit your completed assignment by following the directions linked below. Please check the Course Calendar for specific due datos. Save your assignment as a Microsoft Excel document. (Mac users, please remember to append the \"xisx\" extension to the filename.) The name of the file should be your first initial and last name, followed by an underscore and the name of the assignment, and an underscore and the date. An example is shown below
Workings:
1. Current Ratio : This ratio indicates the ability of business to meet its maturing current liabilties. Standard current ratio in a business is taken as 2:1. An increase thereon reflects improvement in liquidity position. In november, the current ratio turns out to be 4:1 and in december it turns out to be 9.08:1. It shows a increase in current ratio which if seen in quantitative terms is a good sign but when you see it with a deep analysis may be the things may differ. For example may be the inventories must be slow moving which may cause its piling up and increase stock value. So a indepth analysis is suggested.
2.Debt Equity Ratio : The ratio works out to be : November 0.32 & December 0.107. It implies liabilities are 32% of equity for nov and 10.7% for dec of the stockholder\'s equity. Creditors usually like a lower ratio i.e less than 1 as it indicates greater protection to the money financed by them.
3.Profit Margin : This works out to be : More information needed to calculate this ratio.
ANALYSIS:
1. As on 30th November, the account receivsbles are nil which indicates customers are prompt in making payments and nothing is due. We find a current ratio of 4, which is again a good sign, which shows liabilities can be easily paid. Debt equity ratio turns out to be 0.32 , from opting for a loan this ratio is good enough to impress your prospective creditors. Profit margin ratio could not be found out due to insufficient information.
2.After analysing situation of both the months, the financial position has certainly improved as the ratios depict. To note is, the higher the current ratio is the better the financial position of the company & the lower the debt equity ratio is your chance of you getting a loan sanctioned easily.
3.Strengths : The ratios depict a good perfoemance. The net income has also increased.but the sales figure is required to find out by how much..?
Weakness: The company is risk averse.
4. The areas where it should improve is it should take loan & expand its business.
THE FURTHER WORKING OUT & PREPARING A PROFORMA STATEMENT REQUIRES MORE INFORMATION.(income statement)
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