Micro Chip Computer Corporation’s Performance
This analysis is the study of the performances of Micro Chip Computer Corporation. In the process of studying the sales growth, I prepared year-to-year percentage annual growth and forecasted income statements for 2009. Based on the analysis that was performed, inferences have been made.
The year-to-year percentage annual growth in total net sales
The percent change in sales was minimal in 2006- 2007 and maximum 2007-2008 that is increasing to 35.71% from -33.11%.
|Net sales (millions||11,933||9,181||6,141||8,334|
|Growth in sales |
- S1 – previous year sales
- S2– Current year sales
The company is likely to achieve +10% annual revenue growth in the year 2009. In fact, most companies experienced a decline in sales in 2007-2008 when Micro Chip Computer Corporation showed some growth.
It is very evident from the above figures that the company will deliver extremely good results in terms of growing sales volume. Using the calculations stated above, one figure outgrowth in sales will +10% per year. The target revenue figure expected is 110% of 8,334,000,000= 9,167,400,000. The sales growth clearly indicates the company’s success.
However, there is a lack of information as to how much of the growth comes from their products, manufacturing or from design activities.
Forecasting Of Income Statement
The income statement shows the profit the company makes. However, since the income statement consists of a lot more data than just the profit earned, it is helpful for internal and external stakeholders. This is because the income statement shows exactly how the company has come to earn the profit it posts. The essence of the income statement lies in explaining how the revenues and expenses lead to the mentioned profits. Generally, managers are satisfied and investors favorable towards companies that have as high revenue margins and fewer expenses as possible.
|Cost of sales||5,458||65.41%||6,549.37|
|R & D||525||6.29%||629.81|
|Selling, General and administrative||691||8.28%||829.06|
|In- process R&D||–|
|Total operating expenses||1,216||14.57%||1659.13|
|Total Interest and other income net||194||2.33%||233.30|
|Income before provision for income taxes||1854||22.35%||2,037.60|
|Provision for income tax (15%)||278.10||305.64|
Sales for 2009 = 120% of 8,344,000,000= 10,012,800,000
Most of the items in the income statement have been forecasted using the percentage of sales method. Selling/general/admin expenses have been calculated using the percentage of sales method. Other operating expenses were calculated as a percentage of sales; however we did not use either the arithmetic or geometric mean. Instead, I looked at the data and saw that the expenses had increased significantly in the previous year and decided that is was likely that this would continue in the future, especially when seeing that the selling/general/admin expenses had decreased. Therefore the decision was made to use 20% of sales as our forecasting assumption because it was in between the arithmetic mean and the 2009 calculation and seemed like a likely result.
The assumption in this case is that the growth experienced in 2008 was not due to an extraordinary sale or item but due to normal marketing. This assumption is reasonable.