Figure 1 BMD, Inc. Income Statements (in 000s) &nb

Figure 1

BMD, Inc. Income Statements (in 000s)

Current Pro-Forma

Year Statements

	2017	2018	2019	2020	2021	2022
Net sales (all credit)	$797	$2,893	$3,679	$5,138	$7,392	$9,953
Cost of goods sold	278	981	1021	1582	2154	3685
Gross profit	519	1912	2658	3556	5238	6268
Selling and admin expenses	602	644	876	1387	2120	2597
Other income (expenses)*	0	0	0	700	0	0
Operating profit	-83	1268	1782	2869	3118	3671
Interest expense	13	47	56	194	201	243
Income before taxes	-96	1221	1726	2675	2917	3428
Income taxes	0	488	432	669	729	857
(40% in 2018; 25% thereafter)
Net income	($96)	$733	$1,295	$2,006	$2,188	$2,571

Dividends paid	0	0	0	0	0	0
Increase in retained earnings	($96)	$733	$1,295	$2,006	$2,188	$2,571
Average number of shares**	2326	2326	2347	2347	2347	2347
Earnings per share	($0.04)	$0.31	$0.55	$0.85	$0.93	$1.10
*Other income (expenses) refers to extraordinary gains and losses. In 2020 $700,000 is expected in
settlement of their suit - no final agreement yet.
**Shares are not publicly traded.

Is projected net income growing faster or more slowly than projected sales? Discuss any differences. You should carefully review the 2020 Income Statement data to see if you want to recommend or make any adjustments.

Expert Solution

BMD, Inc. Income Statements (in 000s)	Current	Pro-Forma	Analysis
Year Statements
	2017	2018	(2018-2017)/2017	2019	(2019-2018)/2018	2020	(2020-2019)/2019	2021	(2021-2020)/2020	2022	(2022-2021)/2021
Net sales (all credit)	797	2893	262.99%	3679	27.17%	5138	39.66%	7392	43.87%	9953	34.65%	Compared to 2019, sales is growing at an increasing rate in 2020
Cost of goods sold	278	981	252.88%	1021	4.08%	1582	54.95%	2154	36.16%	3685	71.08%	Compared to 2019, COGS is also growing at an increasing rate in 2020
Gross profit	519	1912	268.40%	2658	39.02%	3556	33.78%	5238	47.30%	6268	19.66%	Compared to 2019, G/P is growing slowly --due to increase in COGS in 2020
Selling and admin expenses	602	644	6.98%	876	36.02%	1387	58.33%	2120	52.85%	2597	22.50%	Compared to 2019, S& A is also growing at an increasing rate in 2020
Other income (expenses)*	0	0		0		700		0	-100.00%	0		Extraordinary gains expected in 2020
Operating profit	-83	1268	-1627.71%	1782	40.54%	2869	61.00%	3118	8.68%	3671	17.74%	Operating profit has increased due to the extraordinary gain included.
Interest expense	13	47	261.54%	56	19.15%	194	246.43%	201	3.61%	243	20.90%	Compared to 2019, Interest expense is also growing at an increasing rate in 2020
Income before taxes	-96	1221	-1371.88%	1726	41.36%	2675	54.98%	2917	9.05%	3428	17.52%	Despite increased interest expense,EBT has increased due to the extraordinary gain included.
Income taxes	0	488		432	-11.48%	669	54.86%	729	8.97%	857	17.56%	Compared to 2019, Income-tax expense is also growing at an increasing rate in 2020---due to the extrordinary gain.
(40% in 2018; 25% thereafter)
Net income	-96	733	-863.54%	1294	76.53%	2006	55.02%	2188	9.07%	2571	17.50%	Net income is showing more growth rate than that in sales(when compared to 2019 figures)---because of inclusion of that extraordinary gain, even suoerseding increased interest expense

Dividends paid	0	0		0		0		0		0
Increase in retained earnings	-96	733	-863.54%	1294	76.53%	2006	55.02%	2188	9.07%	2571	17.50%
Average number of shares**	2326	2326	0.00%	2347	0.90%	2347	0.00%	2347	0.00%	2347	0.00%
Earnings per share	-0.04	0.32	-863.54%	0.55	74.96%	0.85	55.02%	0.93	9.07%	1.10	17.50%

So, the answer is

YES. The projected net income is growing faster (55.02 % over 2019 net income) than projected sales (39.66% over 2019 sales)

This is mainly due to the inclusion of the extrordinary item of gain

despite increasing growth rates , observed in almost all the expense-categories, like COGS, Selling & administration & interest expenses.

so, to study the actual growth, we should leave out the extraordinary items--so as to get a real & comparable view of the state of affairs.

As can be seen in the revised Table below, when that $ 700 000 is removed, 2020 net income is showing minimal growth of 0.93% ----much less than the growth rate of sales(39.66%)

	2019	(2019-2018)/2018	2020	(2020-2019)/2019
Net sales (all credit)	3679	27.17%	5138	39.66%
Cost of goods sold	1021	4.08%	1582	54.95%
Gross profit	2658	39.02%	3556	33.78%
Selling and admin expenses	876	36.02%	1387	58.33%
Other income (expenses)*	0
Operating profit	1782	40.54%	2169	21.72%
Interest expense	56	19.15%	194	246.43%
Income before taxes	1726	41.36%	1975	14.43%
Income taxes	432	-11.48%	669	54.86%
(40% in 2018; 25% thereafter)
Net income	1294	76.53%	1306	0.93%

Dividends paid	0		0
Increase in retained earnings	1294	76.53%	1306	0.93%
Average number of shares**	2347	0.90%	2347	0.00%
Earnings per share	0.55	74.96%	0.56	0.93%

jeff jeffy answered 2 years ago

1. Bien Company has the following financial statements for 2018: Income statement &nb

1. Bien Company has the following financial statements for 2018: Income statement balance sheet Sales $ 36,000 Assets $ 28,300 Debt $ 7000 Costs 27,500 Equity 21,300 Net income $ 8,500 Total $ 28,300 Total $28,300 The company has no dividend currently. It expects 10% sales, costs and income increase in 2019. It also predicts assets increase by 10% as well. Create a pro forma 2019 income statement and balance...

Xerbert Co Budgeted and Actual Income Statements For the year Ending December 31 (000s omitted) Budgeted...

Xerbert Co Budgeted and Actual Income Statements For the year Ending December 31 (000s omitted) Budgeted Actual Xenox Xeon Total Xenox Xeon Total Units sales 150 100 250 130 130 260 Net Peso sales P900 P1,000 P1,900 P780 P1,235 P2,015 Variable expenses 450 750 1,200 390 975 1,365 P450 P 250 P 700 P390 P 260 P 650 Fixed expenses P 200 P 190 Manufacturing 153 140 Marketing 95 90 Total fixed experience P 448 P 420...

ABC Inc. Statement of Income For the period October 1, 2018 to September 30, 2019 Revenue &nb

ABC Inc. Statement of Income For the period October 1, 2018 to September 30, 2019 Revenue $15,800,000 Operating Expenses: Rent 1,350,000 Advertising expense 1,105,000 Bad Debts 179,000 Salaries and wages 3,800,000 Interest 3,150,000 Accounting and legal 195,000 Meals and entertainment 1,300,000 Amortization 750,000 Repairs and maintenance 500,000 Automotive 2,120,000 Net Income from Operations 1,351,000 Gain on disposal of asset 350,000 Net income before taxes 1,701,000 Income Taxes ...

Current Income Statement &nb

Current Income Statement Current Balance Sheet Net sales $6,500 Cash $ 900 Accounts payable $1,020 Less: Cost of goods sold 4,922 Accounts rec. 620 Long-term debt 4,360 Less: Depreciation 570 Inventory 2,850 Common stock 2,400 Earnings before interest and taxes 1,008 Total $4,370 Retained earnings 1,190 Less: Interest paid 300 Net fixed assets 4,600 Taxable Income $ 708 Total assets $8,970 Total liab. & equity $8,970 Less: Taxes 248 ...

Advertising Sales (in $000s) (in $000s) 1 30 184.4 2 40 279.1 3 40 244 4...

Advertising Sales (in $000s) (in $000s) 1 30 184.4 2 40 279.1 3 40 244 4 50 314.2 5 60 382.2 6 70 450.2 7 70 423.6 8 70 410.2 9 80 500.4 10 90 505.3 sum 600 3693.6 Calculate the sample covariance and also calculate the sample mean and variance for the advertising and sales variables.

Income Stmt info: 2018 &nb

Income Stmt info: 2018 2019 Sales $1,000,000 $1,050,000 less Cost of Goods Sold: 400,000 432,000 Gross Profit 600,000 618,000 Operating Expenses 350,000 365,750 Earnings before Interest & Taxes 250,000 252,250 Interest exp 20,000 20,400 earnings before Taxes 230,000 231,850 Taxes 69,000 69,555 Net Income $161,000 $162,295 Balance Sheet info: 12/31/2018 ...

Common-Size and Pro Forma Income Statements Refer to the income statements for The Gap, Inc., presented...

Common-Size and Pro Forma Income Statements Refer to the income statements for The Gap, Inc., presented below. a. Prepare common-size income statements for fiscal years 2014 (ending January 31, 2015) and 2013 (ending February 1, 2014). Round answers to one decimal place (i.e., 0.2568 = 25.7%). The Gap, Inc. Common-Size Income Statements Fiscal year ended Jan. 31, 2015 Feb. 1, 2014 Net sales $15,779 Answer% $15,492 Answer% Cost of goods sold & occupancy expenses 9,925 Answer% 9,634 Answer% Gross profit...

The financial statements for Bank are shown below (all amounts in $000s). Round all answers to...

The financial statements for Bank are shown below (all amounts in $000s). Round all answers to two decimal places (e.g. 4.25%) Balance Sheet Bank Assets Liabilities and Equity Cash $ 1,650 Brokered deposits $ 9,500 Demand deposits from other FIs 2,000 Small time deposits 15,700 Investments 7,700 Jumbo CDs 2,540 Federal funds sold 750 Federal funds purchased 2,800 Loans 19,250 Equity 3,310 Reserve for loan losses (2,500 ) Branches and offices 5,000 Total assets $ 33,850 Total liabilities/equity $ 33,850...

SCANDI HOME FURNISHINGS, INC. Income Statements

SCANDI HOME FURNISHINGS, INC. Income Statements 2014 2015 2016 Net Sales $1,300,000 $1,500,000 $1,800,000 Cost of Goods Sold 780,000 900,000 1,260,000 Gross Profit 520,000 600,000 540,000 Marketing 130,000 150,000 200,000 General & Administrative 150,000 150,000 200,000 Depreciation 40,000 53,000 60,000 EBIT 200,000 247,000 80,000 Interest 45,000 57,000 70,000 Earnings Before...

Income Statements Segmented by Territory Script, Inc., has two product lines. The September income statements of...

Income Statements Segmented by Territory Script, Inc., has two product lines. The September income statements of each product line and the company are as follows: SCRIPT, INC. Product Line and Company Income Statements For Month of September Pens Pencils Total Sales $25,000 $30,000 $55,000 Less variable expenses (10,000) (12,000) (22,000) Contribution margin 15,000 18,000 33,000 Less direct fixed expenses (10,000) (9,000) (19,000) Product margin $5,000 $9,000 $14,000 Less common fixed expenses (6,000) Net income $8,000 Pens and pencils are sold...

Question