For 2017, the firm is forecasting a 40% increase in sales and that its year end operating costs will decline to 60% of sales. Tax rate, interest expense and dividend payout ratio are expected to remain constant.Required:What is the projected 2017 net income? Reima Inc. 2016 income statement is presented below.SalesP3,500,000Operating Costs2,500,000Earnings before interest and taxesP1,000,000Interest expense200,000Earnings before taxesP800,000Income tax (40%)320,000Net IncomeP480,000Dividends (40%)Addition to retained earningsP192,000P288,000

A 40% increase in sales : = P3,500,000 + (P3,500,000 × 40% )= P3,500,000 + P1,400,000= P4,900,000…

For 2017, the firm is forecasting a 40% increase in sales and that its year end operating costs will decline to 60% of sales. Tax rate, interest expense and dividend payout ratio are expected to remain constant. Required: What is the projected 2017 net income?

For 2017, the firm is forecasting a 40% increase in sales and that its year end operating costs will decline to 60% of sales. Tax rate, interest expense and dividend payout ratio are expected to remain constant. Required: What is the projected 2017 net income?

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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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Required:
What is the projected 2017 net income?

Reima Inc. 2016 income statement is presented below.
Sales
P3,500,000
Operating Costs
2,500,000
Earnings before interest and taxes
P1,000,000
Interest expense
200,000
Earnings before taxes
P800,000
Income tax (40%)
320,000
Net Income
P480,000
Dividends (40%)
Addition to retained earnings
P192,000
P288,000

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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