Colorado State University Management Discussion Questions

Option #2: Techno Corporation Presentation

Techno Corporation is developing its pro forma financial statement forecasts for 2020 and 2021. Its actual results for 2019 are shown in the income statement and balance sheet.

Background

• The relationship between cost of goods sold and sales revenue Is expected to continue in the near term and no inflation is expected.
• Operating expenses include $200,000 in depreciation (fixed expense), the remainder is variable costs tied to sales revenue.
• Fixed assets are adequate to support sales growth for the next two years and long=term debt will decline $200,000 per year.
• Dividend policy calls for 40% of net profits after taxes to be paid before yearend.
• Interest is 10% of long-term debt and notes payable
• Inventory needs to grow at half the rate of sales growth and accounts receivable maintains the same relationship to sales as was the case on December 31, 2019 for 2019 sales. Accounts payable maintains the same relationship to cost of good sold as of December 31, 2019 for 2019 sales.
• Any cash over $500,000 is put in marketable securities, Interest income is negligible
• Other current liabilities are stable.
• Taxes payable are equal to one-half of the current year’s taxes
• Assume sales will increase 10% per year for each of the next two years.

Assignment

You are a financial manager, internal to this firm. You have been asked to present in front of investors who are interested in putting large amounts of money into this company. Your goal is to use the data of these financial statements to convince them to do so. Complete a power point presentation that provides an initial impression of the company financial situation. Please provide an analysis on the company’s assets, liabilities, cash, and profit. Prepare 10–15 slides with 150–200 words in the notes page. Speak to the trends of the firm.