base on the image provided answer the following a. What is the overall performance of the company in the next five (5) years? Justify your answer.b. At what year will the forecasted total operating expenses exceed the standard? Give at least two(2) possible reasons behind it. Migatus Enterprise is one of the top retail companies in the Philippines. Mr. Rene Tanasas, its Chief ExecutiveOfficer (CEO), wanted to establish a simple income statement model that can forecast its company's incomein the next five (5) years. He wanted the model to do some cost analysis which includes knowing the average,weighted average, and median of the costs for each year.Mr. Tanasas knew that aside from being an auditor, you are also a financial modeler; thus, he approached youto create a simple income statement model of its company. He gave you the following information for the pasttwo (2) years of its operations:Income Statement20X120X2RevenuesP300,000P400,000Less: Cost of Goods Sold (COGS)120,000275,000Gross Profit180,00020,000125,00021,200Less: General, Selling, and Administrative ExpensesEarnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)Less: Depreciation Expense160,000103,80012,00012,0003,500144,5003,50088,300InterestEarnings Before Taxes (EBT)Less: TaxesNet Income43,35026,490P101,150P61,810Based on the above data, Mr. Tanasas came up with the following assumptions for the next five (5) years:The sales growth will remain constant.The percentage of COGS against sales is equal to the average percentage of the above COGSS.The general and administrative expenses will be P20,000 per year.The interest will increase by P6,500, and the tax rate will decrease to 20%.The depreciation expense is equal to 4% of sales.The amount of standard total operating expenses of the company per year is 400,000.The company has the following weight for its costs:o Cost of Goods Sold, 55%;o General, Selling, and Administrative Expenses, 20%;o Depreciation Expenses, 10%;Interest Expenses, 5%; andTaxes, 10%

The forecasted income statement of a company shows how the company may perform in the upcoming…

base on the image provided answer the following a. What is the overall performance of the company in the next five (5) years? Justify your answer. b. At what year will the forecasted total operating expenses exceed the standard? Give at least two (2) possible reasons behind it.

base on the image provided answer the following a. What is the overall performance of the company in the next five (5) years? Justify your answer. b. At what year will the forecasted total operating expenses exceed the standard? Give at least two (2) possible reasons behind it.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

base on the image provided answer the following

a. What is the overall performance of the company in the next five (5) years? Justify your answer.

b. At what year will the forecasted total operating expenses exceed the standard? Give at least two
(2) possible reasons behind it.

Migatus Enterprise is one of the top retail companies in the Philippines. Mr. Rene Tanasas, its Chief Executive
Officer (CEO), wanted to establish a simple income statement model that can forecast its company's income
in the next five (5) years. He wanted the model to do some cost analysis which includes knowing the average,
weighted average, and median of the costs for each year.
Mr. Tanasas knew that aside from being an auditor, you are also a financial modeler; thus, he approached you
to create a simple income statement model of its company. He gave you the following information for the past
two (2) years of its operations:
Income Statement
20X1
20X2
Revenues
P300,000
P400,000
Less: Cost of Goods Sold (COGS)
120,000
275,000
Gross Profit
180,000
20,000
125,000
21,200
Less: General, Selling, and Administrative Expenses
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
Less: Depreciation Expense
160,000
103,800
12,000
12,000
3,500
144,500
3,500
88,300
Interest
Earnings Before Taxes (EBT)
Less: Taxes
Net Income
43,350
26,490
P101,150
P61,810
Based on the above data, Mr. Tanasas came up with the following assumptions for the next five (5) years:
The sales growth will remain constant.
The percentage of COGS against sales is equal to the average percentage of the above COGSS.
The general and administrative expenses will be P20,000 per year.
The interest will increase by P6,500, and the tax rate will decrease to 20%.
The depreciation expense is equal to 4% of sales.
The amount of standard total operating expenses of the company per year is 400,000.
The company has the following weight for its costs:
o Cost of Goods Sold, 55%;
o General, Selling, and Administrative Expenses, 20%;
o Depreciation Expenses, 10%;
Interest Expenses, 5%; and
Taxes, 10%

Leveraging special tenchniques in analyzing historical data to predict future trends. Forecasting covers the methods and types of forecasting and their application to case studies.

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