Financial Reporting Financial Statement Analysis and Valuation 7Th Edition Whalen Test Bank Full Chapter PDF

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Chapter 10--Forecasting Financial Statements
Student: ___________________________________________________________________________
1. The objective of forecasting is to develop

A. stand-alone financial statements for future analysis.
B. a set of realistic expectations for future value-relevant payoffs.
C. a balance sheet and income statement that articulate.
D. financial statements for comparison to industry averages.
2. Nichols and Wahlen's 2004 study showed that superior forecasting provides the potential to earn superior
security returns. Nichols and Wahlen's findings indicate
A. that an investor could earn excess returns if the investor could predict accurately the sign of the change in
earnings one year ahead.
B. that an investor could earn excess returns if the investor could predict accurately the magnitude of the change
in earnings one year ahead.
C. that an investor could earn excess returns if the investor could predict accurately the sign of the change in
cash flows from operations one year ahead.
D. that an investor could earn excess returns if the investor could predict accurately the sign of the change in
working capital one year ahead.
3. Financial statement forecasts rely on additivity within financial statements and articulation across financial
statements. Given this information forecasts of future growth in inventory will most likely affect growth in
A. accounts receivables.
B. accounts payable.
C. depreciation.
D. salary payable.
statements. Given this information sales growth forecasts will most likely affect growth in
C. depreciation.
D. salary payable.
5. Projecting sales price changes depends on factors specific to the firm and its industry that might affect
demand and price elasticity. Which of the following types of companies would most likely be able to increase
prices?
A. A firm in a capital intensive industry that is expected to operate near capacity for the near future.
B. A firm in a capital intensive industry in which excess capacity exists.
C. A firm operating in an industry that is expected to experience technological improvements in its production
process.
D. A firm operating in an industry that is transitioning from the high growth to the maturity phase of its life
cycle.
demand and price elasticity. Which of the following companies would most likely not be able to increase prices
in the near future?
C. A firm operating in an industry that is expected to maintain its current production processes.
D. A firm operating in an industry that is transitioning from the introduction phase to the high growth phase of
its life cycle.
7. If a company has very low operating leverage (i.e. a low proportion of fixed costs in the cost structure) and
no changes are expected in operations
A. percentage change income statement percentages can serve as the basis for projecting operating expenses.
B. using common-size income statement percentages will overstate future projected operating expenses.
C. using common-size income statement percentages will understate future projected operating expenses.
D. using common-size income statement percentages can serve as a reasonable basis for projecting future
operating expenses.
8. When projecting operating expenses it is important to determine the mix of fixed and variable costs, one clue
suggesting the presence of fixed costs is
A. the percentage change in cost of goods sold in prior years is significantly greater than the percentage change
in sales.
B. the percentage change in cost of goods sold in prior years is significantly less than the percentage change in
sales.
C. low capital intensity in the production process.
D. the percentage change in sales in prior years is significantly greater than the percentage change in
receivables.
9. To ensure that the financial statements articulate, it is important that the change in the cash balance on the
balance sheet each year agrees with
A. the cash collections from sales in the projected income statement.
B. the cash provided by or used by operations on the projected statement of cash flows.
C. the net change in cash on the projected statement of cash flows.
D. the net change in working capital from period to period.
10. An analyst using the inventory turnover ratio to calculate future levels of inventory may face the problem
that
A. the method reduces the potential understatement inherent in average balances.
B. the method can introduce artificial volatility in ending balances.
C. the method results in understating inventory each year.
D. the method results in overstating inventory each year.
11. Sparky’s
Sparky’s sells auto parts. Provided below is selected financial information from the company’s 2012 annual
report:
Sparky’s Selected Financial Statement data

Fiscal year end 2012 2011
(amounts in thousands of dollars)
Net sales $125,410 $106,380
Cost of Goods Sold -104,090 -89,359
Gross Profit $21,320 $17,021
Inventory $31,353 $30,850
Using Sparky’s financial information what is the company’s inventory turnover ratio for 2012?
A. 0.69
B. 1.00
C. 3.35
D. 4.03
12. Sparky’s
report:

Net sales $125,410 $106,380
Gross Profit $21,320 $17,021
Inventory $31,353 $30,850
Sparky’s forecasts that sales will grow by 25% in 2013 and that its cost of goods sold to sales ratio will be the same in 2013 as it was in 2012. If
these assumptions prove correct and Sparky’s inventory turnover ratio for 2013 is 4.5 what will be the level of inventory at the end of 2013?
A. $31,353
B. $38,320
C. $40,000
D. $42,314
13. Card Sharks, Inc.
Card Sharks, Inc. sells baseball cards and other memorabilia. The company tries to maintain a cash balance
equivalent to approximately 30 days of sales. Sales in 2011 amounted to $352,412 and the company expects
growth in 2012 of 33% and in 2013 of 40%.
Given the information provided about Card Sharks, what is the company’s 2012 projected year-end cash
balance?
A. $966
B. $28,965
C. $15,623
D. $38,524
Given the information provided about Card Sharks, what is the company’s 2013 projected annual sales?
A. $656,191
B. $493,377
C. $187,483
D. $542,333
Given the information provided about Card Sharks, what is the company’s 2013 projected cash balance?
A. $53,934
B. $49,524
C. $21,873
D. $38,524
16. All of the following are the fundamental bases for future payoffs to equity shareholders and share value
except:
A. earnings
B. cash flows
C. dividends
D. depreciation
17. All of the following are true regarding the key principles of forecasting except:
A. Financial statement forecasts need not be comprehensive.
B. Forecasts should not manifest wishful thinking.
C. Financial statement forecasts must be internally consistent.
D. Financial statement forecasts must rely on assumptions that have external validity.
18. Which of the following statements does not apply to preventing “garbage in, garbage out” when
implementing a forecasting game plan?
A. The quality of the financial statement forecasts will depend on the quality of the
forecast assumptions.
B. The quantities forecasted within financial statement forecasts will depend on the quantity of the forecast
assumptions.
C. Analysts should justify and evaluate the most important assumptions that reflect the critical risk and success
factors of the firm’s strategy.
D. Analysts can impose reality checks on the assumptions by analyzing the forecasted financial statements
using ratios, common-size, and rate-of-change financial statements.
19. If a firm competes in a capital-intensive industry with excess capacity, all of the following are true except:
A. price increases will be less likely.
B. price increases will be more likely.
C. companies in competitive industries face high exit barriers.
D. companies in competitive industries may experience future price decreases.
20. Using common-size balance sheet percentages to project individual assets, liabilities, or shareholders’ equity
has all of the following shortcomings except:
A. Individual assets, liabilities, and shareholders’ equity are not independent
of each other.
B. If a company experiences changing proportions for investments in securities among its assets, other asset
categories may show decreasing percentages in some years even though their dollar amounts are increasing.
C. Individual assets, liabilities, and shareholders’ equity are independent
of each other.
D. The common-size percentages do not permit the analyst to easily change
the assumptions about the future behavior of an individual asset or liability.
21. All of the following statements are true regarding ratios and forecasts except:
A. Ratios cannot confirm whether forecast assumptions will turn out to be correct.
B. Ratios can tell whether future sales growth was accurately captured.
C. Ratios cannot tell whether assumptions about future cash flows are realistic.
D. Ratios can tell whether growth rates for sales are consistent with past sales growth performance.
22. Projected financial statements can be used to assess the sensitivity of all of the following except:
A. a firm’s liquidity
B. a firm’s leverage to changes in assumptions
C. conditions under which the firm’s debt covenants may become binding
D. unusual patterns for projected total assets.
23. Common-size financial statements recast each statement item as

A. a percentage of the "bottom line."
B. a percentage using industry averages for the "base number."
C. a percentage using a base year number for each line item.
D. a percentage of some "base number" on the financial statement in question.
24. Financial ratio, percentage, and trend comparisons can be distorted by all of the following except:
A. aggressive revenue recognition practices.
B. the timing of asset purchases.
C. accounting for similar economic fundamentals in similar fashion.
D. the presence of nonrecurring items among the firms being analyzed.
25. All of the following are true regarding projected financial statements except:
A. The statement of cash flows is the most critical forecast since it reflects profitability rather than viability.
B. Preparing projected financial statements must incorporate a company's past performance records.
C. Preparing projected financial statements must incorporate a company's current performance records.
D. The income statement demonstrates immediate capability to service debt for banks or real potential for
growth in returns for venture capital.
26. As a firm progresses through the introduction life-cycle stage, what type of flexible account will it be more
likely to use to balance the balance sheet?
A. dividends.
B. growth related assets.
C. issued equity.
D. stock buy-backs.
27. As a firm progresses through the decline life-cycle stage, what type of flexible account will it be more likely
to use to balance the balance sheet?
A. issued debt.
C. issued equity.
D. stock buy-backs.
28. As a firm progresses through the growth life-cycle stage, what type of flexible account will it be more likely
A. issued debt.
B. paying down of debt.
C. dividends
D. stock buy-backs.
29. Financial statement forecasts are important analysis tools because forecasts of
______________________________ play a central role in valuation and many other financial decision
contexts.
________________________________________
30. Realistic expectations are ____________________ and ____________________.

________________________________________
31. Financial statement forecasts should rely on ____________________ within financial statements.
________________________________________
32. Financial statement forecasts should rely on _________________________ across financial statements.
________________________________________
33. A firm in a mature industry with little expected change in its market share might anticipate volume increases
equal to the growth rate in the _________________________ within its geographic markets.
________________________________________
34. Firms which have differentiated ___________________________________ for its products may have a
greater potential to increase prices.
________________________________________
35. It may be difficult to forecast sales for firms with _________________________ patterns because their
historical growth rates reflect wide variations in both direction and amount from year to year.
________________________________________
36. A company that has a cost structure in which its costs grow at a lesser rate than its sale enjoys
___________________________________.
________________________________________
37. To develop forecasts of individual assets, the analyst must first link historical growth rates for individual
assets to historical growth rates in sales or other ___________________________________.
________________________________________
38. The analyst can capture projected levels of operating activity by using ______________________________
to develop forecasts for individual assets.
________________________________________
assets to historical growth rates in ____________________ and other activity-based drivers.
________________________________________
40. For some types of assets, such as plant, property and equipment, asset growth typically
____________________ future sales growth.
________________________________________
41. For some types of assets, such as accounts receivable, asset growth typically ____________________ future
sales growth.
________________________________________
42. When projecting ____________________, the analyst should consider economy-wide factors such as the
expected rate of general price inflation in the economy.
________________________________________
43. A firm in transition from the high growth to the mature phase of its life cycle, or a firm with significant
technological improvements in its production processes, might expect increases in
______________________________ but decreases in sales prices per unit.
________________________________________
44. If a firm competes in a ___________________________________ industry that the analyst expects will
operate near capacity for the next few years, then price increases will be more likely.
________________________________________
45. Analysts must develop realistic expectations for the outcomes of future business activities.
To develop these expectations, analysts build a set of _____________________________.
________________________________________
46. Many times an analyst will compute ending accounts receivable or inventory balances using turnover ratios.
Discuss the advantage and disadvantage of using this methodology.
47. The authors set forth a seven-step forecasting game plan for preparing pro forma financial statements.
Discuss the seven steps necessary to prepare the three principal financial statements.
48. One problem caused by using turnover ratios to calculate asset balances is that it can lead to volatility in
projected ending balances. What might an analyst do to reduce the "sawtooth" pattern caused by using turnover
ratios?
49. The first step in the forecasting game plan is to project sales and other other operating activities. Sales
numbers are determined by both a volume component and price component. Projecting prices depends on
factors specific to the firm and its industry that might affect demand and price elasticity. For the following types
of firms discuss whether it would be likely that the firm would be able to raise future prices:
a. A firm in a capital-intensive industry that is expected to operate near capacity for the near future.
b. A firm in an industry that is expected to experience numerous technological improvements.
c. A firm with products which are transitioning from the growth to maturity phase of the product life cycle.
d. A firm that has established a well known brand name and image.
50. As an analyst it is important when projecting sales to make estimates about future changes in sales volume.
Compare how you might make estimates about future sales value for a company in a mature industry and one in
a rapidly growing industry.
51. In comparison of 2010 to 2009 performance, Watson Company's inventory turnover decreased substantially,
although sales and inventory amounts were essentially unchanged.
Required:
During a corporate meeting you heard the following managers postulate why the decreased inventory turnover
ratio happened. Which statement best explains the decreased inventory turnover ratio and why?
a. The marketing manager said: The decreased inventory turnover ratio is due to an increase in the cost of goods
sold.
b. The operations manager said: The decreased inventory turnover ratio is due to increased gross profit
percentage.
c. The credit manager said: The decreased inventory turnover ratio is due to a decrease in the accounts
receivable turnover.
d. The shipping manager said: The decreased inventory turnover ratio is due to decreased total asset turnover.
52.
Bargains, Inc. manufactures and markets toys. Selected income statement data from 2010 and 2009 appear
below:
Bargains, Inc.
Selected Income Statement data
Fiscal year end 12/31/2010 12/31/2009
Net sales $4,885,340 $4,637,924
Cost of Goods Sold -3,824,353 -3,638,990
Gross profit 1,060,987 998,934
Required:
a. An analyst can sometimes estimate the variable cost as a percentage of sales for a particular cost by dividing the amount of the
change in the cost item between two years by the amount of the change in sales for those two years. The analyst can then multiply the
variable cost percentage times sales to determine the total variable cost. Subtracting the variable cost yields the fixed cost for that
particular item. Follow this procedure to determine the cost structure for costs of goods sold for Bargains, Inc.
b. Bargains, Inc. projects sales to grow at the following percentages in future years: 2011, 9 percent; 2012, 11 percent; 2013, 15 percent.
Using this information project sales, cost of goods sold and gross profit for Bargains, Inc. for 2011 to 2013.
53. Glad Rags, Inc. sells women's clothes. Provided below is selected financial statement information:
Glad Rags, Inc.

Selected Financial Statement data
Net sales $47,895 $42,589
Cost of Goods Sold (35,952) (32,588)
Gross profit $11,943 $10,001
Inventory $ 5,548 $ 4,948
Required:
a. Compute the inventory turnover ratio for 2010.
b. Clothes, Inc. projects that sales will grow at a compound rate of 7% per year for years 2011-2013 and that the cost of goods sold to sales
percentage will equal that realized in 2010. Compute the projected implied level of inventory at the end of 2011 to 2013.
54. Office Mart, Inc. sells numerous office supply products through a national distribution center. The company
has focused on maintaining a cash balance equivalent to approximately 14 days of sales. Sales in 2010
amounted to $125,980,673 and the company expects growth in 2011 of 11% and in 2012 of 15%. Given this
information determine Office Mart, Inc.'s projected year-end cash balance for 2011 and 2012.
55. The following information about Douglas Corp.’s Accounts Receivable and Sales are presented below:
Year
2012-Beginnin
g Balance of
A/R = $791M
Year 2012
-Ending
Balance of A/R
= $807M
Year 2012 -
Sales =
$3,002M
Assumptions:
Sales growth
will be equal to
6% per year
A/R turnover
will stay
constant
throughout the
forecast period
Required:
a. Using this information, forecast Douglas Corp.’s the growth in Accounts Receivable for years 2013-2017.
b. What problem does a constant A/R turnover assumption cause?
c. Provide a solution to the problem caused by a constant A/R turnover assumption.
56. The following balance sheet and income statement pertain to Goode Corp., using the following assumptions
complete a forecasted 2013 income statement:
Assumpt
ions for
2013:
Revenue growth rate 32%
COGS 64% of sales
Operating expenses 23% of sales
Interest expense 10% of
beginning
long-term
debt
Tax rate 35%
Goode Corp. Consolidated Statement of Income

(Thousands except per share amounts) 2012
Net Revenues $345,871

Cost of Revenue (226,546)
SG&A (83,009)
Operating Income 36,316
Interest Expense (484)
Income Before Income Taxes 35,832
Income taxes (12,541)
Net Income $23,291
Goode Corp Consolidated Balance Sheet

(Thousands) 2012
Current Assets
Cash and Equivalents 7,905
Merchandise inventory 6,308
Accounts receivable 6,614
PPE (including intangibles), net 39,458
Total Assets 60,285
Liabilities and Stockholders' Equity

Accounts payable 9,643
Long-term debt 13,500
Shareholders' Equity
Common stock and APIC 28,613
Retained earnings 8,529
Total Liabilities and Shareholders' Eq. 60,285
57. Simmons Company
These data represent a summary of your first-iteration forecast amounts for Year 1. Simmons uses dividends as
a flexible financial account.
Year + 1
Operating Income $ 58
Interest Expense 8
Income before Tax $ 50
Tax Provision (20.0 percent effective tax rate) 10
Net Income $ 40
Total Assets $200
Accrued Liabilities $ 43
Long-Term Debt $ 80
Common Stock, at par $ 20
Retained Earnings (at the beginning of Year 1) $ 34
A. See the information for Simmons Company.

Compute the amount of dividends you can assume that Simmons will pay in order to balance your projected balance sheet. Present the projected
balance sheet.
B. See the information for Simmons Company.

Now assume that Simmons pays common shareholders a dividend of $25 in Year +1. Also assume that Simmons uses long-term debt as a flexible
financial account, increasing borrowing when it needs capital and paying down debt when it generates excess capital. For simplicity, assume that
Simmons pays 10.0 percent interest expense on the ending balance in long-term debt for the year and that interest expense is tax deductible at
Simmons' average tax rate of 20.0 percent.
Present the projected income statement and balance sheet for Year +1. (Hint: Because of the circularity between interest expense, net income,
and debt, several iterations may be needed to balance the projected balance sheet and to have the projected balance sheet articulate with net income.
You may find it helpful to program a spreadsheet to work the iterative computations.)
58. Repair Specialists is a leading retailer of home improvement products. It operates large warehouse-style
stores. Despite declining sales and difficult economic conditions in 2009 and 2010, Repair Specialists continued
to invest in new stores. The following table provides summary data for Repair Specialists.
Repair Specialists 2009 2010

(amounts in millions except number of stores)
Number of stores 2,234 2,274
Sales revenues $77,349 $71,288
Inventory $11,731 $10,673
Capital expenditures, net $ 3,558 $ 1,847
Required
a. Use the preceding data for Repair Specialists to compute average revenues per store,
capital spending per new store, and ending inventory per store in 2010.
b. Assume that Repair Specialists will add 100 new stores by the end of Year 1. Use
the data from 2010 to project Year 1 sales revenues, capital spending, and ending
inventory. Assume that each new store will be open for business for an average of
one-half year in Year 1. For simplicity, assume that in Year 1, Repair Specialists’ sales
revenues will grow, but only because it will open new stores.
59. Techtronics is a leader in manufacturing computer chips, which is very capital-intensive. Because the
production processes in computer chip manufacturing require sophisticated and rapidly changing technology,
production and manufacturing assets in the chip industry tend to have relatively short useful lives.
The following summary information relates to Techtronics’ property, plant, and

equipment for 2009 and 2010:
Techtronics (amounts in millions) 2009 2010

Property, Plant, and Equipment, at cost $ 46,052 $ 48,088
Accumulated Depreciation $(29,134) $(30,544)
Property, Plant, and Equipment, net $ 16,918 $ 17,544
Depreciation Expense $ 4,360
Capital Expenditures, net $ 5,200
Required
Assume that Techtronics depreciates all property, plant, and equipment using the straight-line
depreciation method and zero salvage value. Assume that Intel spends $6,000 on new
depreciable assets in Year 1 and does not sell or retire any property, plant, and equipment
during Year 1.
a. Compute the average useful life that Techtronics used for depreciation in 2010.
b. Project total depreciation expense for Year 1 using the following steps: (i) project
depreciation expense for Year 1 on existing property, plant, and equipment at the
end of 2010; (ii) project depreciation expense on capital expenditures in Year 1
assuming that Intel takes a full year of depreciation in the first year of service; and
(iii) sum the results of (i) and (ii) to obtain total depreciation expense for Year 1.
c. Project the Year 1 ending balance in property, plant, and equipment, both at cost
and net of accumulated depreciation.
60. Arco is an integrated manufacturer in capital-intensive industry. Nuwak manufactures more

commodity-level products in the same industry at the lower end of the market and uses less capital-intensive
processes. The following data describe sales and cost of products sold for both firms for Years 3 and 4.
($ amounts in millions) Year 3 Year 4

Arco
Sales $4,042 $ 5,217
Cost of Products Sold 3,887 4,554
Gross Profit $ 155 $ 663
Gross Margin 3.8% 12.7%
Nuwak
Sales $6,266 $11,377
Gross Profit $ 269 $ 2,248
Industry analysts anticipate the following annual changes in sales for the next five years:
Year +1, 5 percent increase; Year +2, 10 percent increase; Year +3, 20 percent increase; Year +4, 10 percent decrease; Year +5, 20 percent decrease.
Required
a. The analyst can sometimes estimate the variable cost as a percentage of sales for a
particular cost (for example, cost of products sold) by dividing the amount of the
change in the cost item between two years by the amount of the change in sales for
those two years. The analyst can then multiply the variable-cost percentage times
sales to estimate the total variable cost. Subtracting the variable cost from the total
cost yields an estimate of the fixed cost for that particular cost item. Follow this procedure
to estimate the manufacturing cost structure (variable cost as a percentage of
sales, total variable costs, and total fixed costs) for cost of products sold for both Arco and Nuwak in Year 4.
b. Discuss the structure of manufacturing cost (that is, fixed versus variable) for each
firm in light of the manufacturing process and type of product produced.
c. Using the analysts’ forecasts of sales changes, compute the projected sales, cost of
products sold, gross profit, and gross margin (gross profit as a percentage of sales)
of each firm for Year +1 through Year +5.
d. Why do the levels and variability of the gross margin percentages differ for these two
firms for Year +1 through Year +5?
61. Saunders Corporation manufactures consumer electronics products. Selected income statement data for
2009 and 2010 follow (amounts in millions of dollars):
Saunders Corporation (amounts in millions of dollars) 2009 2010

Sales 8,296 8,871
Selling and Administrative Expenses (1,788) (1,714)
Operating Income before Income Taxes 618 867
Required
a. The analyst can sometimes estimate the variable cost as a percentage of sales for a particular cost (for example, cost of goods sold) by dividing the
amount of the change in the cost item between two years by the amount of the change in sales for those two years. The analyst can then multiply total
sales by the variable-cost percentage to determine the total variable cost. Subtracting the variable cost from the total cost yields the fixed cost
component for that particular cost item. Follow this procedure to determine the cost structure (fixed cost plus variable cost as a percentage of sales)
for cost of goods sold for Saunders.
b. Repeat requirement a. for selling and administrative expenses.
c. Saunders Corporation discloses that it expects sales to grow at the following percentages
in future years: Year 1, 12 percent; Year 2, 10 percent; Year 3, 8 percent; Year 4, 6 percent. Project sales, cost of goods sold, selling and
administrative expenses, and operating income before income taxes for Saunders for Year 1 to Year 4 using the cost structure amounts derived in
requirements a. and b.
d. Compute the ratio of operating income before income taxes to sales for Year 1 through Year 4.
e. Interpret the changes in the ratio computed in requirement d. in light of the expected changes in sales.
62. Hart designs, manufactures, and markets toys in domestic and international markets. Sales during 2010
totaled $4,022 million. Accounts receivable totaled $655 million at the beginning of 2010 and $612 million at
the end of 2010.
Required
a. Use the average balance to compute the accounts receivable turnover ratio for Hart for 2010.
b. Hart generated a compound annual sales growth rate of 13.0 percent over the past two years. Assume that
Hart's sales will continue to grow at that rate each year for Year +1 through Year +5 and that the accounts
receivable turnover ratio each year will equal the ratio computed in requirement a. for 2010. Project the amount
of accounts receivable at year-end through Year +5 based on the accounts receivable turnover computed in
requirement a. Also compute the percentage change in accounts receivable between each of the year-ends
through Year +5.
c. Does the pattern of growth in your projections of Hart's accounts receivable seem
reasonable considering the assumptions of smooth growth in sales and steady turnover? Explain.
d. The changes in accounts receivable computed in requirement b. display the sawtooth pattern depicted in
Exhibit 10.5 in the text. Smooth the changes in accounts receivable by computing the year-end accounts
receivable balances for Year 1 through Year 5 using the compound annual growth rate in accounts receivable
between the end of 2010 and the end of Year +1 from requirement b.
e. Smooth the changes in accounts receivable using the compound annual growth rate in accounts receivable
between the end of 2010 and the end of Year +4 from requirement b. Apply this growth rate to compute
accounts receivable at the end of Year +1 through Year +5. Why do the amounts for ending accounts receivable
using the growth rate from requirement d. differ from those using the growth rate from this requirement?
f. Compute the accounts receivable turnover for 2010 by dividing sales by the balance in accounts receivable at
the end of 2010 (instead of using average accounts receivable as in requirement a). Use this accounts receivable
turnover ratio to compute the projected balance in accounts receivable at the end of Year +1 through Year +5.
Also compute the percentage change in accounts receivable between the year-ends for Year +1 through Year
+5.
63. Benson sells books through retail stores and on the Web. For a retailer like Benson, inventory is a critical
element of the business and it is necessary to carry a wide array of titles. In 2010, sales totaled $5,122 million
and cost of sales and occupancy totaled $3,541 million. Inventories constitute the largest asset on Benson’s
balance sheet, totaling $1,203 million at the end of 2010 and $1,358 million at the end of 2009.
Required
a. Compute the inventory turnover ratio for Benson for 2010.
b. Over the last two years, the number of Benson retail stores has remained fairly steady and sales have grown
at a compounded annual rate of 11.6 percent. Assume that the number of stores will remain constant and that
sales will continue to grow at an annual rate of 11.6 percent each year between Year +1 and Year +5. Also
assume that the future cost of goods sold to sales percentage will equal that realized in 2010 (which is very
similar to the cost of goods sold percentage over the past three years). Project the amount of inventory at the
end of Year +1 through Year +5 using the inventory turnover ratio computed in Part a. Also compute the
percentage change in inventories between each of the year-ends between 2010 and Year +5. Does the pattern of
growth in your projections of Benson inventory seem reasonable to you considering the assumptions of smooth
growth in sales and steady cost of goods sold percentages? Explain.
c. The changes in inventories in Part b display the sawtooth pattern depicted in Exhibit 10.5 of the text. Smooth
the changes in the inventory forecasts between 2010 and Year +5 using the compound annual growth rate in
inventories between the end of 2010 and the end of Year +5 implied by the projections in Part b. Does this
pattern of growth seem more reasonable? Explain.
d. Now suppose that instead of following the smoothing approach in Part c, you used the rate of growth in
inventory during 2010 to project future inventory balances at the end of Year +1 through Year +5. Use these
projections to compute the implied inventory turnover rates. Does this pattern of growth and efficiency in
inventory for Benson seem reasonable? Explain.
Chapter 10--Forecasting Financial Statements Key
1. The objective of forecasting is to develop

A. stand-alone financial statements for future analysis.
B. a set of realistic expectations for future value-relevant payoffs.
C. a balance sheet and income statement that articulate.
D. financial statements for comparison to industry averages.
2. Nichols and Wahlen's 2004 study showed that superior forecasting provides the potential to earn superior
security returns. Nichols and Wahlen's findings indicate
A. that an investor could earn excess returns if the investor could predict accurately the sign of the change in
earnings one year ahead.
B. that an investor could earn excess returns if the investor could predict accurately the magnitude of the change
in earnings one year ahead.
C. that an investor could earn excess returns if the investor could predict accurately the sign of the change in
cash flows from operations one year ahead.
D. that an investor could earn excess returns if the investor could predict accurately the sign of the change in
working capital one year ahead.
statements. Given this information forecasts of future growth in inventory will most likely affect growth in
C. depreciation.
D. salary payable.
statements. Given this information sales growth forecasts will most likely affect growth in
C. depreciation.
D. salary payable.
demand and price elasticity. Which of the following types of companies would most likely be able to increase
prices?
C. A firm operating in an industry that is expected to experience technological improvements in its production
process.
D. A firm operating in an industry that is transitioning from the high growth to the maturity phase of its life
cycle.
demand and price elasticity. Which of the following companies would most likely not be able to increase prices
in the near future?
C. A firm operating in an industry that is expected to maintain its current production processes.
D. A firm operating in an industry that is transitioning from the introduction phase to the high growth phase of
its life cycle.
7. If a company has very low operating leverage (i.e. a low proportion of fixed costs in the cost structure) and
no changes are expected in operations
A. percentage change income statement percentages can serve as the basis for projecting operating expenses.
B. using common-size income statement percentages will overstate future projected operating expenses.
C. using common-size income statement percentages will understate future projected operating expenses.
D. using common-size income statement percentages can serve as a reasonable basis for projecting future
operating expenses.
8. When projecting operating expenses it is important to determine the mix of fixed and variable costs, one clue
suggesting the presence of fixed costs is
A. the percentage change in cost of goods sold in prior years is significantly greater than the percentage change
in sales.
B. the percentage change in cost of goods sold in prior years is significantly less than the percentage change in
sales.
C. low capital intensity in the production process.
D. the percentage change in sales in prior years is significantly greater than the percentage change in
receivables.
9. To ensure that the financial statements articulate, it is important that the change in the cash balance on the
balance sheet each year agrees with
A. the cash collections from sales in the projected income statement.
B. the cash provided by or used by operations on the projected statement of cash flows.
C. the net change in cash on the projected statement of cash flows.
D. the net change in working capital from period to period.
10. An analyst using the inventory turnover ratio to calculate future levels of inventory may face the problem
that
A. the method reduces the potential understatement inherent in average balances.
B. the method can introduce artificial volatility in ending balances.
C. the method results in understating inventory each year.
D. the method results in overstating inventory each year.
11. Sparky’s
report:

Net sales $125,410 $106,380
Gross Profit $21,320 $17,021
Inventory $31,353 $30,850
Using Sparky’s financial information what is the company’s inventory turnover ratio for 2012?
A. 0.69
B. 1.00
C. 3.35
D. 4.03
12. Sparky’s
report:

Net sales $125,410 $106,380
Gross Profit $21,320 $17,021
Inventory $31,353 $30,850
Sparky’s forecasts that sales will grow by 25% in 2013 and that its cost of goods sold to sales ratio will be the same in 2013 as it was in 2012. If
these assumptions prove correct and Sparky’s inventory turnover ratio for 2013 is 4.5 what will be the level of inventory at the end of 2013?
A. $31,353
B. $38,320
C. $40,000
D. $42,314
Given the information provided about Card Sharks, what is the company’s 2012 projected year-end cash
balance?
A. $966
B. $28,965
C. $15,623
D. $38,524
Given the information provided about Card Sharks, what is the company’s 2013 projected annual sales?
A. $656,191
B. $493,377
C. $187,483
D. $542,333
Given the information provided about Card Sharks, what is the company’s 2013 projected cash balance?
A. $53,934
B. $49,524
C. $21,873
D. $38,524
16. All of the following are the fundamental bases for future payoffs to equity shareholders and share value
except:
A. earnings
B. cash flows
C. dividends
D. depreciation
17. All of the following are true regarding the key principles of forecasting except:
A. Financial statement forecasts need not be comprehensive.
B. Forecasts should not manifest wishful thinking.
C. Financial statement forecasts must be internally consistent.
D. Financial statement forecasts must rely on assumptions that have external validity.
18. Which of the following statements does not apply to preventing “garbage in, garbage out” when
implementing a forecasting game plan?
A. The quality of the financial statement forecasts will depend on the quality of the
forecast assumptions.
B. The quantities forecasted within financial statement forecasts will depend on the quantity of the forecast
assumptions.
C. Analysts should justify and evaluate the most important assumptions that reflect the critical risk and success
factors of the firm’s strategy.
D. Analysts can impose reality checks on the assumptions by analyzing the forecasted financial statements
using ratios, common-size, and rate-of-change financial statements.
19. If a firm competes in a capital-intensive industry with excess capacity, all of the following are true except:
A. price increases will be less likely.
B. price increases will be more likely.
C. companies in competitive industries face high exit barriers.
D. companies in competitive industries may experience future price decreases.
20. Using common-size balance sheet percentages to project individual assets, liabilities, or shareholders’ equity
has all of the following shortcomings except:
A. Individual assets, liabilities, and shareholders’ equity are not independent
of each other.
B. If a company experiences changing proportions for investments in securities among its assets, other asset
categories may show decreasing percentages in some years even though their dollar amounts are increasing.
C. Individual assets, liabilities, and shareholders’ equity are independent
of each other.
D. The common-size percentages do not permit the analyst to easily change
the assumptions about the future behavior of an individual asset or liability.
21. All of the following statements are true regarding ratios and forecasts except:
A. Ratios cannot confirm whether forecast assumptions will turn out to be correct.
B. Ratios can tell whether future sales growth was accurately captured.
C. Ratios cannot tell whether assumptions about future cash flows are realistic.
D. Ratios can tell whether growth rates for sales are consistent with past sales growth performance.
22. Projected financial statements can be used to assess the sensitivity of all of the following except:
A. a firm’s liquidity
B. a firm’s leverage to changes in assumptions
C. conditions under which the firm’s debt covenants may become binding
D. unusual patterns for projected total assets.
23. Common-size financial statements recast each statement item as

A. a percentage of the "bottom line."
B. a percentage using industry averages for the "base number."
C. a percentage using a base year number for each line item.
D. a percentage of some "base number" on the financial statement in question.
24. Financial ratio, percentage, and trend comparisons can be distorted by all of the following except:
A. aggressive revenue recognition practices.
B. the timing of asset purchases.
C. accounting for similar economic fundamentals in similar fashion.
D. the presence of nonrecurring items among the firms being analyzed.
25. All of the following are true regarding projected financial statements except:
A. The statement of cash flows is the most critical forecast since it reflects profitability rather than viability.
B. Preparing projected financial statements must incorporate a company's past performance records.
C. Preparing projected financial statements must incorporate a company's current performance records.
D. The income statement demonstrates immediate capability to service debt for banks or real potential for
growth in returns for venture capital.
26. As a firm progresses through the introduction life-cycle stage, what type of flexible account will it be more
likely to use to balance the balance sheet?
A. dividends.
C. issued equity.
D. stock buy-backs.
27. As a firm progresses through the decline life-cycle stage, what type of flexible account will it be more likely
A. issued debt.
C. issued equity.
D. stock buy-backs.
28. As a firm progresses through the growth life-cycle stage, what type of flexible account will it be more likely
A. issued debt.
B. paying down of debt.
C. dividends
D. stock buy-backs.
29. Financial statement forecasts are important analysis tools because forecasts of
______________________________ play a central role in valuation and many other financial decision
contexts.
future payoffs
30. Realistic expectations are ____________________ and ____________________.

unbiased, objective or
objective, unbiased
31. Financial statement forecasts should rely on ____________________ within financial statements.
additivity
32. Financial statement forecasts should rely on _________________________ across financial statements.
articulation
33. A firm in a mature industry with little expected change in its market share might anticipate volume increases
equal to the growth rate in the _________________________ within its geographic markets.
population
34. Firms which have differentiated ___________________________________ for its products may have a
greater potential to increase prices.
unique characteristics
35. It may be difficult to forecast sales for firms with _________________________ patterns because their
historical growth rates reflect wide variations in both direction and amount from year to year.
cyclical sales
36. A company that has a cost structure in which its costs grow at a lesser rate than its sale enjoys
___________________________________.
economies of scale
assets to historical growth rates in sales or other ___________________________________.
activity-based drivers
38. The analyst can capture projected levels of operating activity by using ______________________________
to develop forecasts for individual assets.
turnover rates
assets to historical growth rates in ____________________ and other activity-based drivers.
sales
40. For some types of assets, such as plant, property and equipment, asset growth typically
____________________ future sales growth.
leads
41. For some types of assets, such as accounts receivable, asset growth typically ____________________ future
sales growth.
lag
42. When projecting ____________________, the analyst should consider economy-wide factors such as the
expected rate of general price inflation in the economy.
prices
43. A firm in transition from the high growth to the mature phase of its life cycle, or a firm with significant
technological improvements in its production processes, might expect increases in
______________________________ but decreases in sales prices per unit.
sales volume
44. If a firm competes in a ___________________________________ industry that the analyst expects will
operate near capacity for the next few years, then price increases will be more likely.
capital-intensive
45. Analysts must develop realistic expectations for the outcomes of future business activities.
To develop these expectations, analysts build a set of _____________________________.
financial statement forecasts
46. Many times an analyst will compute ending accounts receivable or inventory balances using turnover ratios.
Discuss the advantage and disadvantage of using this methodology.
One advantage of using this method is that it reduces the potential understatement inherent in average balances.
One disadvantage is that it may introduce artificial volatility in ending balances.

47. The authors set forth a seven-step forecasting game plan for preparing pro forma financial statements.
Discuss the seven steps necessary to prepare the three principal financial statements.
The seven steps are:
1. Project revenues from sales and other operating activities.

2. Project operating expenses and derive projected operating income.
3. Project the operating assets that will be necessary to support the level of operations projected in Steps 1 and 2. Also project the
operating liabilities that will be triggered by normal business operations.
4. Project the financial leverage, financial assets, and common equity capital that will be necessary to finance the net operating assets
projected in Step 3. In addition, determine the financing costs triggered by the financial liabilities and any investment income from
financial assets in the firm’s capital structure. From projected operating income from Step 2, subtract interest expense and add interest
income.
5. Project nonrecurring gains or losses (if any) and derive projected income before tax. Subtract the projected provision for income taxes
to derive the projected net income. Subtract expected dividends from net income to obtain the projected change in retained earnings.
Also project any other comprehensive income items.
6. Check whether the projected balance sheet is in balance. Repeat Steps 4 and 5 until it is in balance.
7. Derive the projected statement of cash flows from the projected income statements and the changes in the projected balance sheet
amounts.
48. One problem caused by using turnover ratios to calculate asset balances is that it can lead to volatility in
projected ending balances. What might an analyst do to reduce the "sawtooth" pattern caused by using turnover
ratios?
One thing an analyst might do is estimating the average rate of growth in the asset balance expected over a long
forecast period and then smooth each year-end balance using the average growth rate.
49. The first step in the forecasting game plan is to project sales and other other operating activities. Sales
numbers are determined by both a volume component and price component. Projecting prices depends on
factors specific to the firm and its industry that might affect demand and price elasticity. For the following types
of firms discuss whether it would be likely that the firm would be able to raise future prices:
a. A firm in a capital-intensive industry that is expected to operate near capacity for the near future.
b. A firm in an industry that is expected to experience numerous technological improvements.
c. A firm with products which are transitioning from the growth to maturity phase of the product life cycle.
d. A firm that has established a well known brand name and image.
Suggested answers:
a. In this case, due to capacity constraints the firm should be able to raise prices. Because the industry is capital intensive it is not likely
that a competitor could easily and quickly enter the market and steal market share by cutting prices.
b. This firm would probably not be able to raise prices due to efficiencies brought on by the technological change, although sales
volumes may increase.
c. This firm may find it more difficult to raise prices, as the product's sales reach a level in which demand is more stable. Thus, price
increases may result in consumers switching products, etc.
d. Firms with well known images and brand names may be better positioned to raise prices because consumers feel such brand loyalty.
50. As an analyst it is important when projecting sales to make estimates about future changes in sales volume.
Compare how you might make estimates about future sales value for a company in a mature industry and one in
a rapidly growing industry.
Suggested Solution from the text::

For a stable firm in a mature industry (for example, consumer foods), an analyst may conclude that the firm will
not significantly increase its market share, in which he or she might anticipate that sales volume with grow with
population growth in the firm’s geographic markets. For a firm that has increased its production in an industry
with high anticipated growth (for example, biotechnology or cell phones), the analyst can use the industry
growth rate coupled with the expansion in the firm’s capacity to project sales volume increases.
51. In comparison of 2010 to 2009 performance, Watson Company's inventory turnover decreased substantially,
although sales and inventory amounts were essentially unchanged.
Required:
During a corporate meeting you heard the following managers postulate why the decreased inventory turnover
ratio happened. Which statement best explains the decreased inventory turnover ratio and why?
a. The marketing manager said: The decreased inventory turnover ratio is due to an increase in the cost of goods
sold.
b. The operations manager said: The decreased inventory turnover ratio is due to increased gross profit
percentage.
c. The credit manager said: The decreased inventory turnover ratio is due to a decrease in the accounts
receivable turnover.
d. The shipping manager said: The decreased inventory turnover ratio is due to decreased total asset turnover.
The operations manager’s statement (b) best explains the decreased inventory turnover ratio. The gross profit
margin increased. Sales were unchanged, so the gross profit margin increase would be due to decreased cost of
goods sold. If inventory were also unchanged, the lower cost of goods sold would result in lower inventory
turnover.
52.
Bargains, Inc. manufactures and markets toys. Selected income statement data from 2010 and 2009 appear
below:
Bargains, Inc.
Selected Income Statement data
Fiscal year end 12/31/2010 12/31/2009
Net sales $4,885,340 $4,637,924
Cost of Goods Sold -3,824,353 -3,638,990
Gross profit 1,060,987 998,934
Required:
a. An analyst can sometimes estimate the variable cost as a percentage of sales for a particular cost by dividing the amount of the
change in the cost item between two years by the amount of the change in sales for those two years. The analyst can then multiply the
variable cost percentage times sales to determine the total variable cost. Subtracting the variable cost yields the fixed cost for that
particular item. Follow this procedure to determine the cost structure for costs of goods sold for Bargains, Inc.
b. Bargains, Inc. projects sales to grow at the following percentages in future years: 2011, 9 percent; 2012, 11 percent; 2013, 15 percent.
Using this information project sales, cost of goods sold and gross profit for Bargains, Inc. for 2011 to 2013.
a.
Change in COGS $185,363
Change in sales $247,416
Variable cost percentage 75%
Fixed Costs:
2010 $160,348
b.
2011 2012 2013
Projected Growth Rate 9% 11% 15%
Net Sales 5,325,021 5,910,773 6,797,389
Cost of Goods Sold:

Fixed portion ($ 160,348) ($ 160,348) ($ 160,348)
Variable portion (75% of Sales) (3,993,766) (4,433,080) (5,098,042)
Gross Profit 1,170,907 1,317,345 1,538,999
53. Glad Rags, Inc. sells women's clothes. Provided below is selected financial statement information:
Glad Rags, Inc.

Selected Financial Statement data
Net sales $47,895 $42,589
Gross profit $11,943 $10,001
Inventory $ 5,548 $ 4,948
Required:
a. Compute the inventory turnover ratio for 2010.
b. Clothes, Inc. projects that sales will grow at a compound rate of 7% per year for years 2011-2013 and that the cost of goods sold to sales
percentage will equal that realized in 2010. Compute the projected implied level of inventory at the end of 2011 to 2013.
a. Inventory Turnover 6.85

I.T. = $35,952/.5(5,548 + 4,948) = 6.85
b.
Inventory Average Inventory Inventory Percentage
Sales COGS Turnover Inventories beg. Year end year change
2010 47,895.00 $35,952 6.85 5,248 4,948 5,548 12%
2011 51,247.65 $38,469 6.85 5,616 5,548 5,684 2%
2012 54,834.99 $41,161 6.85 6,009 5,684 6,334 11%
2013 58,673.43 $44,043 6.85 6,430 6,334 6,525 3%
54. Office Mart, Inc. sells numerous office supply products through a national distribution center. The company
has focused on maintaining a cash balance equivalent to approximately 14 days of sales. Sales in 2010
amounted to $125,980,673 and the company expects growth in 2011 of 11% and in 2012 of 15%. Given this
information determine Office Mart, Inc.'s projected year-end cash balance for 2011 and 2012.
Annual Average Days Sales Year-end

Sales Sales/Day in Cash Cash Bal.
2010 $125,980,673 Sales/365 Given Sales/Day *14
2011 $139,838,547 383,119 14 $5,363,670
2012 $160,814,329 440,587 14 $6,168,221
55. The following information about Douglas Corp.’s Accounts Receivable and Sales are presented below:
Year
2012-Beginnin
g Balance of
A/R = $791M
Year 2012
-Ending
Balance of A/R
= $807M
Year 2012 -
Sales =
$3,002M
Assumptions:
Sales growth
will be equal to
6% per year
A/R turnover
will stay
constant
throughout the
forecast period
Required:
a. Using this information, forecast Douglas Corp.’s the growth in Accounts Receivable for years 2013-2017.
b. What problem does a constant A/R turnover assumption cause?
c. Provide a solution to the problem caused by a constant A/R turnover assumption.
a.
2012 2013* 2014* 2015* 2016* 2017*

Sales $3,002 $3,182 $3,373 $3,575 $3,790 $4,017
Beg. A/R balance $791 807 887 909 995 1,023
Ending A/R balance $807 887 909 995 1,023 1,116
Sales Growth Rate 6%

A/R turnover 3.76
Growth in A/R 9.90% 2.48% 9.46% 2.81% 9.09%
b. The constant A/R turnover assumption results in the sawtooth forecasting problem.
c.
2012 2013* 2014* 201 2016* 201
5* 7*
Sales $3,002 $3,182 $3,373 $3,575 $3,790 $4,017
Beg. A/R balance $791 807 887 909 995 1,023
Ending A/R balance $807 887 909 995 1,023 1,116
Sales Growth Rate 6%

A/R turnover 3.76
Yearly Growth in A/R 9.90% 2.48% 9.46% 2.81% 9.09%
Compound Average growth in 6.69%

A/R=
A/R based on CAGR year 1 Y2* Y3* Y4* Y5* Y6*
Beginning Balance $791 807 861 919 980 1,046

Ending Balance $807 861 919 980 1,046 1,116
Growth in A/R 6.69% 6.69% 6.69% 6.69% 6.69%
One potential solution is to: not use the average balance sheet account balance when initially calculating turnover ratios-but rather base it on the
ending balance. Then forecast using average turnover ratios and then smooth changes using the compound average growth rate.
56. The following balance sheet and income statement pertain to Goode Corp., using the following assumptions
complete a forecasted 2013 income statement:
Assumpt
ions for
2013:
Revenue growth rate 32%
COGS 64% of sales
Operating expenses 23% of sales
Interest expense 10% of
beginning
long-term
debt
Tax rate 35%
Goode Corp. Consolidated Statement of Income
(Thousands except per share amounts) 2012
Net Revenues $345,871

Cost of Revenue (226,546)
SG&A (83,009)
Operating Income 36,316
Interest Expense (484)
Income Before Income Taxes 35,832
Income taxes (12,541)
Net Income $23,291
Goode Corp Consolidated Balance Sheet

(Thousands) 2012
Current Assets
Cash and Equivalents 7,905
Merchandise inventory 6,308
Accounts receivable 6,614
PPE (including intangibles), net 39,458
Total Assets 60,285
Liabilities and Stockholders' Equity

Accounts payable 9,643
Long-term debt 13,500
Shareholders' Equity
Common stock and APIC 28,613
Retained earnings 8,529
Total Liabilities and Shareholders' Eq. 60,285
Goode Corp. Consolidated Statements of Income

(Thousands except per share amounts) 2013 2012
Net Revenues $456,550 $345,871

SG&A (105,006) (83,009)
Operating Income 59,352 36,316
Interest Expense (1,350) (484)
Income Before Income Taxes 58,002 35,832
Income taxes (20,301) (12,541)
Net Income $37,701 $23,291
57. Simmons Company
These data represent a summary of your first-iteration forecast amounts for Year 1. Simmons uses dividends as
a flexible financial account.
Year + 1
Operating Income $ 58
Interest Expense 8
Income before Tax $ 50
Tax Provision (20.0 percent effective tax rate) 10
Net Income $ 40
Total Assets $200
Long-Term Debt $ 80
Common Stock, at par $ 20
Retained Earnings (at the beginning of Year 1) $ 34
A. See the information for Simmons Company.
Compute the amount of dividends you can assume that Simmons will pay in order to balance your projected balance sheet. Present the projected
balance sheet.
B. See the information for Simmons Company.

Now assume that Simmons pays common shareholders a dividend of $25 in Year +1. Also assume that Simmons uses long-term debt as a flexible
financial account, increasing borrowing when it needs capital and paying down debt when it generates excess capital. For simplicity, assume that
Simmons pays 10.0 percent interest expense on the ending balance in long-term debt for the year and that interest expense is tax deductible at
Simmons' average tax rate of 20.0 percent.
Present the projected income statement and balance sheet for Year +1. (Hint: Because of the circularity between interest expense, net income,
and debt, several iterations may be needed to balance the projected balance sheet and to have the projected balance sheet articulate with net income.
You may find it helpful to program a spreadsheet to work the iterative computations.)
A. This problem basically asks students to compute the plug to dividends to balance the balance sheet for
Simmons Company for Year +1. Students can compute the plug to dividends as follows:
Year +1 Balance Sheet Amounts before Plugging Dividends:

Total Assets $ 200
Long-Term Debt $ 80
Common Stock (at par) $ 20
Beginning Retained Earnings $ 34
Year +1 Net Income $ 40
Total Liabilities and Equity
before Plugging Dividends $ 217
Necessary plug to increase dividends to balance the balance sheet: $17.
Year +1 Balance Sheet Amounts after Plugging Dividends:

Total Assets $ 200
Long-Term Debt $ 80
Ending Retained Earnings $ 57 = ($34 + $40 – $17)
Total Liabilities and Equity $ 200
B. This problem asks students to compute the plug to long-term debt to balance the balance sheet for Simmons
Company for Year +1. This problem introduces circularity to balancing the balance sheet because the amount
of debt needed depends on net income, which is affected by the interest expense on the amount of debt
needed. Students should input these amounts into a spreadsheet and have the spreadsheet compute the amounts
iteratively. Students should obtain the following amounts:
Year +1
Projected Income Statement Amounts
Operating Income $ 58.00
Interest Expense –8.87
Income before Tax $ 49.13
Tax Provision (20.0 percent rate) –9.83
Net Income $ 39.30
Year +1
Projected Balance Sheet Amounts
Total Assets $ 200
Long-Term Debt $ 88.70
Retained Earnings (end of Year +1) $ 48.30 = ($34+$39.30–$25)
Total Liabilities and Shareholders’ Equity $ 200
58. Repair Specialists is a leading retailer of home improvement products. It operates large warehouse-style
stores. Despite declining sales and difficult economic conditions in 2009 and 2010, Repair Specialists continued
to invest in new stores. The following table provides summary data for Repair Specialists.
Repair Specialists 2009 2010

(amounts in millions except number of stores)
Number of stores 2,234 2,274
Sales revenues $77,349 $71,288
Inventory $11,731 $10,673
Capital expenditures, net $ 3,558 $ 1,847
Required
a. Use the preceding data for Repair Specialists to compute average revenues per store,
capital spending per new store, and ending inventory per store in 2010.
b. Assume that Repair Specialists will add 100 new stores by the end of Year 1. Use
the data from 2010 to project Year 1 sales revenues, capital spending, and ending
inventory. Assume that each new store will be open for business for an average of
one-half year in Year 1. For simplicity, assume that in Year 1, Repair Specialists’ sales
revenues will grow, but only because it will open new stores.
In this problem, students work through the computations to project revenue, capital expenditures, and ending
inventory for Repair Specialists, using 100 new stores as the driver of growth forecasts in Year +1. The
problem requires students to use the average number of stores to compute sales, the number of new stores to
compute capital expenditures, and the ending number of total stores to compute ending inventory. The data and
computations follow:
Repair Specialists (Data in Mil- REQ. B

lions Except Number of Stores) 2009 2010 Year +1 Computations
Number of Stores 2,234 2,274 2,374
New Stores 40 100
Average Stores 2,254 2,324
Sales Revenues $ 77,349 $ 71,288 $ 73,502 =2,324x$31.63

REQ. A Sales per Average Store $ 31.63 =$71,288/2,254
Inventory $ 11,731 $ 10,673 $ 11,134 =2,374 x $4.69

REQ. A Ending Inventory per Store $ 4.69 =$10,673/2,274
Capital Expenditures (Net) $ 3,558 $ 1,847 $ 4,618 = 100 x $46.18

REQ. A Capital Expenditures per
New Store $ 46.18 = $1,847/40
59. Techtronics is a leader in manufacturing computer chips, which is very capital-intensive. Because the
production processes in computer chip manufacturing require sophisticated and rapidly changing technology,
production and manufacturing assets in the chip industry tend to have relatively short useful lives.
The following summary information relates to Techtronics’ property, plant, and

equipment for 2009 and 2010:
Techtronics (amounts in millions) 2009 2010

Property, Plant, and Equipment, at cost $ 46,052 $ 48,088
Accumulated Depreciation $(29,134) $(30,544)
Property, Plant, and Equipment, net $ 16,918 $ 17,544
Depreciation Expense $ 4,360
Capital Expenditures, net $ 5,200
Required
Assume that Techtronics depreciates all property, plant, and equipment using the straight-line
depreciation method and zero salvage value. Assume that Intel spends $6,000 on new
depreciable assets in Year 1 and does not sell or retire any property, plant, and equipment
during Year 1.
a. Compute the average useful life that Techtronics used for depreciation in 2010.
b. Project total depreciation expense for Year 1 using the following steps: (i) project
depreciation expense for Year 1 on existing property, plant, and equipment at the
end of 2010; (ii) project depreciation expense on capital expenditures in Year 1
assuming that Intel takes a full year of depreciation in the first year of service; and
(iii) sum the results of (i) and (ii) to obtain total depreciation expense for Year 1.
c. Project the Year 1 ending balance in property, plant, and equipment, both at cost
and net of accumulated depreciation.
This problem gets students working through the computations to project property, plant, and equipment and
depreciation expense for Year +1 for Techtronics, a leading manufacturer of computer chips.
a. The average useful life that Techtronics used in 2010 for depreciation was 10.80 years, computed as
follows:
Useful Life 10.80 Years (= [($46,052 + $48,088)/2]/$4,360)
b. Depreciation expense for Year +1 on (i) existing property, plant, and equipment at the end of 2010; (ii)
capital expenditures in Year +1 assuming that there is $6,000 in expenditures on depreciable assets in Year +1
and assuming that Intel takes a full year of depreciation in the first year of service; and (iii) the sum of (i) and
(ii) to obtain total depreciation expense for Year +1:
Depreciation Expense on Existing PPE $ 4,453 (=$48,088/10.80 Years)

Depreciation Expense on Year +1 Capital
Expenditures $ 556 (= $6,000/10.80 Years)
Total Depreciation Expense $5,009 (= $4,453 + $556)
c. The Year +1 ending balance in property, plant, and equipment, both at cost and net of accumulated
depreciation:
Techtronics (Data in Millions) 2009 2010 Year +1 Computations

Property, Plant, and Equip., at Cost $ 46,052 $ 48,088 $ 54,088 (= $48,088 + $6,000)
Accumulated Depreciation -29,134 -30,544 -35,553 (= $-30,544 - $5,009)
Property, Plant and Equip. (Net) 16,918 17,544 18,535 (= $54,088 - $35,553)
Depreciation Expense 4,360 5,009 Computed above
Capital Expenditures (Net) 5,200 6,000 Assumed
60. Arco is an integrated manufacturer in capital-intensive industry. Nuwak manufactures more
commodity-level products in the same industry at the lower end of the market and uses less capital-intensive
processes. The following data describe sales and cost of products sold for both firms for Years 3 and 4.
($ amounts in millions) Year 3 Year 4

Arco
Sales $4,042 $ 5,217
Gross Profit $ 155 $ 663
Nuwak
Sales $6,266 $11,377
Gross Profit $ 269 $ 2,248
Industry analysts anticipate the following annual changes in sales for the next five years:
Year +1, 5 percent increase; Year +2, 10 percent increase; Year +3, 20 percent increase; Year +4, 10 percent decrease; Year +5, 20 percent decrease.
Required
a. The analyst can sometimes estimate the variable cost as a percentage of sales for a
particular cost (for example, cost of products sold) by dividing the amount of the
change in the cost item between two years by the amount of the change in sales for
those two years. The analyst can then multiply the variable-cost percentage times
sales to estimate the total variable cost. Subtracting the variable cost from the total
cost yields an estimate of the fixed cost for that particular cost item. Follow this procedure
to estimate the manufacturing cost structure (variable cost as a percentage of
sales, total variable costs, and total fixed costs) for cost of products sold for both Arco and Nuwak in Year 4.
b. Discuss the structure of manufacturing cost (that is, fixed versus variable) for each
firm in light of the manufacturing process and type of product produced.
c. Using the analysts’ forecasts of sales changes, compute the projected sales, cost of
products sold, gross profit, and gross margin (gross profit as a percentage of sales)
of each firm for Year +1 through Year +5.
d. Why do the levels and variability of the gross margin percentages differ for these two
firms for Year +1 through Year +5?
a. Compute the cost structure for each firm as follows:

Variable Cost per Dollar of Sales = Change in Cost of Products Sold/Change in
Sales
Total Variable Cost = Variable Cost per Dollar of Sales x Sales
Total Fixed Cost = Total Cost of Product Sold – Total Variable Cost
Arco:
Variable Cost per Dollar of Sales = ($4,554 – $3,887)/($5,217 – $4,042) =
$0.568
Total Variable Cost = $0.568 x $5,217 = $2,963 (65% of cost of products sold)
Total Fixed Cost = $4,554 – $2,963 = $1,591 (35% of cost of products sold)
Nuwak:
Variable Cost per Dollar of Sales = ($9,129 – $5,997)/($11,377 – $6,266)
= $0.613
Total Variable Cost = $0.613 x $11,377 = $6,974 (76% of cost of products sold)
Total Fixed Cost = $9,129 – $6,974 = $2,155 (24% of cost of products sold)
b. Arco is more capital-intensive than Nuwak and therefore has a higher proportion of fixed costs and a
lower proportion of variable costs in its cost structure. Arco also offers products at the higher end of the market
than Nuwak does and should, therefore, have higher selling prices and a higher gross margin. Both of these
factors explain the lower variable cost as a percentage of sales for Arco.
c. (Amounts in Millions)
Arco
Year +1 Year +2 Year +3 Year +4 Year +5
Sales $5,478 $6,026 $7,231 $6,508 $5,206
Less Cost of Products Sold:
Variable Costs (.568 of sales) 3,112 3,423 4,107 3,697 2,957
Fixed Costs 1,591 1,591 1,591 1,591 1,591
Total Costs of Products Sold 4,703 5,014 5,698 5,288 4,548
Gross Profit $ 775 $1,012 $1,533 $1,220 $ 658
Gross Margin % 14.1% 16.8% 21.2% 18.7% 12.6%
Nuwak
Year +1 Year +2 Year +3 Year +4 Year +5
Sales $11,946 $13,140 $15,768 $14,191 $11,353
Less Cost of Products Sold:
Variable Costs (.613 of sales) 7,323 8,055 9,666 8,699 6,959
Fixed Costs 2,155 2,155 2,155 2,155 2,155
Total Costs of Products Sold 9,478 10,210 11,821 10,854 9,114
Gross Profit $2,467 $2,931 $3,947 $3,337 $2,239
Gross Margin % 20.7% 22.3% 25.0% 23.5% 19.7%
d. The average gross margin of Arco is 16.7 percent, with a standard deviation of 3.5 percent. The average gross margin of Nuwak is 22.2
percent, with a standard deviation of 2.1 percent. Despite a higher variable cost per dollar of sales and larger total fixed costs, Nuwak generates a
higher gross margin than Arco because Nuwak’s much larger size creates economies of scale. For example, Nuwak’s fixed costs are 24 percent of
cost of products sold compared to Arco’s fixed costs, which amount to 35 percent of the cost of products sold. The larger variability of the gross
margin for Arco also occurs because of the higher proportion of fixed costs in its cost structure. Compared with Nuwak, Arco realizes greater
incremental economies of scale as sales increase but greater diseconomies of scale as sales decrease. For example, given the same rates of sales
growth over Years +1 to +3, Arco’s gross margin grows from 14.1 percent to 21.2 percent, whereas Nuwak’s gross margin percentage grows from
only 20.7 percent to 25.0 percent.
61. Saunders Corporation manufactures consumer electronics products. Selected income statement data for
2009 and 2010 follow (amounts in millions of dollars):
Saunders Corporation (amounts in millions of dollars) 2009 2010

Sales 8,296 8,871
Selling and Administrative Expenses (1,788) (1,714)
Operating Income before Income Taxes 618 867
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nachs wist ie ’t altaid vàst, dat ie d’r was.… Moar op dag, gong ’t
weg!.. Kaik da’ ha je se weer.… Nou stonge se weer om sain.… ’n
heule bende swarte kerels!.… En nou stonge se weer an s’n strot te
trekke.… kaik!.… soo weer aldegoar sterretjes veur s’n ooge.…
huhu!.… pal d’r veur.… Enn.… nou.. kaik!.… wá’ donker ’t word.…
hoho!.… enne.… enne.. tùg dag.… was ’t strak-en-an!.. Sou die in
de hel komme?.. enne.… Spulle waa’s nooit van sain.… nooit had ie
wá’ f’rkocht.… nooit sou ie s’n spulle weer anroàke!.… Enne.… hai
sou weggaife.… teruggaife.… alles.… alles! Aa’s ie nou moar nie
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gloeie, om s’n kop.—kaik!.… nog donkerder.… veur s’n ooge.…
Jesis waa’n benauwing!.…
Zitten, doodstil, bleef ie ’n poos, verkneed in hijgenden lucht-

snakkenden angst, met z’n handen woest-grabbelend aan z’n
[335]kiel, of ie iets wou loswringen dáár. Langzaam eindelijk zakte
weer gloeiing van z’n kop, begon ie weer te peinzen, stil.. Nou sat ie
nie meer in donker.… Moar kaik!.… de kerels.… die swarte kerels
van sain, woare weg! Moar tug most ’r ies skrikkeliks beure mit sain.
Da’ was vast woar!.. vast woar.. hoho!.… Net of d’r swoare onweer in
de lucht sat.… soo bangelik, beverig en angstig, gejoagd, en keliekig
voelde ie s’n aige!.… Hai wou wel loope.… loope.… Want al die
swoare wolke.… satte op sàin kop.… dá’ voelde ie puur. En nou
kwam ’r weer donkerte veur sain ooge.… donker wier ’t.… heul
donker.…
Schuifelend was ie in den leegen koel-beschaduwden stal, in ’n

duister hoekje op ’n steen neergezakt, met z’n hoofd tegen ’t rem. En
z’n handen, slap en trillerig, hingen langs z’n lijf.
Nou mostie moar bedoàre.… stilletjes.… sain gangetje goan.… dà

konne.… de wolleke soo op s’n kop drukke.… en.… aa’s d’r bliksem
kwam.… kon die nie bai sàin.… nie sien.… want veur sain ooge was
’t donker.… stikke donker.… heulegoar puur nacht.… nou most ie
bedoare.… puur nacht.… stikke benauwd.… puur nacht!.…
[Inhoud]
II.
Hooge zang van werkers galmde uit, achter stekjes en rijzen, den
Juni-ochtend in. Prachtige zangklanken, die zeilden in sonore trilling
door diep luchtenblauw, uit de overal dichtgegroeide en omzonde
groente-tuinen.—In kleur-klatering goudde de aarde, en overal uit de
gaarden, van singelgroen en hagen ingesloten, dampte ochtendgoud
van jongen zomer, nevelvroege dauw, die vonkvuur schoot en
paarlen spatte tusschen grashalmen en bladeren. Achter de hagen,
als groene sierwanden tusschen elken akker òpgegroeid,
schemerden blauwkielen door, werkers die hurkten òver het
lichtverstuivend prachtgroen van aardbeibedden. [336]
Jonge, zoete geuren-hitte trilde uit de gouden aarde en lichtelijk

schroeide de zon Wiereland. Tegen den middag alleen, beefde
zwaarder hitte boven het groengoud van velden, flonkerde diep ’t
licht tusschen de bladeren, stond stil de zanglust van werkers, wèg
in zwaren zwoeg.
Dirk en Kees werkten in ’t paarse schaduwlommer, bij Gerrits

aardappelengrond. Aan één zij achteruit, lag hun akker begrensd
door woest, reusachtig tuinbrok van rijken, stillevenden kweeker
Waarmer. Tot vlak achter de meidoornhaag van beukenlaan naar ’t
duin, liep diens tuin, groot en wild. ’n Lompe, nijdige heereboer, stil-
levend en kwaadaardig, was Waarmer. Z’n huis in ’t tuinbrok, lag er
stil dicht-gegroeid en belommerd in groene schemerkoelte, tusschen
reuzige olmen, eiken, beuken en diep gepoort van pracht-wilde
lanen. Voorstuk met ijzerdraad afgepiekt keken de werkers in,
schemerwoeste diep van den tuin, die nu in den Juniochtend te
wonderen groeide, in sproke-atmosfeer van groengoude scheemring
en kleurrankende bloeipracht. Glans-statige kippetjes liepen los,
rond te kokkelen en te kukelen druk en jolig door het gras, doken
glans-schuchter, met punt-wiegelende staartjes wèg in ’t hooge,
blanke waterster, dat er neergesneeuwd wemelde in vonkschitter
bedauwdrupt, broos en wiegelend op teeren, slanken stengel; hooge
boeketten van blank licht, tusschen diep scheemrend goudgroen.
Jonge abeeltjes stonden in wilden stammekronkel te sneeuwen met
hun witte donsblad, te zilver-wuiven tegen luchtglanzen. En weeke
luwte-schuifel zong om ze, als koelende zingende zomerregen in
ruisch-tuin.—
En laag in ’t wilde boomgroen, stond, in oud-goud rood baksteen,

teer-tonig, verzakt en ingeslonken, ’t stalhuis achter sierdans van
gouden regen, slanke stammetjes, met hun gouden trossen, trossen
in prachthang, als lanen waartusschen zonnewebben te verglanzen
ragden, in trillend waas. Midden in tuinbrok kringde open,
schemering van groen grasvlaktetje, goud-zonnig uitduikend onder
woeste beuken. Blanke ganzen waggelden ’r rond, teer ’t oranje van
hun bekken, en om hen dribbelden jonge blonde, kale kuikentjes,
veerloos en druk, wegzakkend [337]in de grashalmen, in eeuwig
eetgepik, kopjes-golvend door ’t pluimgras, achter elkaar, in
waggelend rijtje.—
Hoog, hals-gerekt, in zij-lingschen oogstaar, waakte vadergans, in

blanken waggel achter de pikkende kuikens áán, soms even
stappend in natten zonneschitter, dat er licht van z’n blanke veeren
droop; drentelde moeder-gans méé, achter beschermd jeugdje, in
het schitter-zonnige, zoete grasgroen. Oud bemenied hekwerk,
stond in rood-felle schittering, half bezond, in sier van vuurlijnen voor
’n gedrochtelijk-uitgeholden boomknoest, monster dat gaapte, met
nijlpaarden-muil, aan ingang. En heel diep, in half-bladerduister,
blankte zacht òp, ’t witte huisje van Waarmer, beluwd onder koelend-
groen uitgeurende kastanjes. Rondom, in ’t wild, danste kring van
reuzevarens een woesten horlepijp, fijn in rankte spitsen hun
krullende toppen, als vingeren slank ver-strekkend. En heel naar
achter lag de woeste tuin dichtgegroeid, brak het lentelicht er in, tot
zilver-koele glanzen, mat-blauwig, dampig licht onder blader-donker,
in al gamma’s van schaduwdiep, geheimvol verruischend ’t lied van
de lommerstilte. Als boven graf van gestorven saizoenen, zoemde er
stil, in zilverblauwig waas, gebroken licht, al ijler uitgezeefd en
onderschept door weer ander boom-groen en struik; dreven daar
rond, geheimen van natuurleven, zalig in eenzamen groei, poëzie
van het stilste, zwijgendste lommer.—
Groote heesters bogen in ranken wiegel òver naar wilde graspluim,

en fijn ruischte ’r koele suizel rond van wind, ruischende
eolusharpen, in fluisterenden zangespraak met bloemengroei en
boomleven. Op ’t koele woningmuurtje, vermarmerd blank, ging in
schaduwsier van varen en takjes, geheimvol leven rond van
silhouetten, waartusschen rondgestrooide goudlichtjes en tril-vonkjes
flitsten, verpijld door hooge tak-kronkels.
In de stille, omlommerde vensterruitjes, droomde koel licht van tuin,

teruggeglansd in zachte vegen van gelen gloor, dof en heimelijk. En
naast ’t hekwerk, brokkelde scheef verzakte, donker bemoste,
roestige kringmuur, verweerd en duister, als ruïne van oud kreunend
leven, waarop pauwenpracht uitwaaierde, [338]bronzen goudscherm
van veeren, groenstalen, kijkende schitterings-oogen van glans
alléén. Zacht hondengeblaf dofte soms òp uit den stillen, binnensten
goudschemer van roerlooze lanen.
In den hoek waar Kees en Dirk werkten, lag achter hagedoorn, ’n
plek als leeggehakt, openend gouden tuinhart. Bleek-schoone, lila-
seringen als jonkvrouwen in biechteenzaamheid gevangen, slankten
plots òp uit gloeiende zonneplek, in lange rijen achter elkaar. Fijn,
hun geurige kroonselen zoetten reuken door de lucht, en boven de rij
van bleeke lila’s, dromden verdonkerend bronzen beuken, als
wolken rood-violet licht, hooger òp doorvlamd van zonnegloed, felle
zang van smachtend rood, tegen het bleeke lila, dat èven er onder
uitgeurde, z’n fijne droomtonen, ijl in bedwelmende sfeer. Telkens
zoo éven, schoot, uit de groen-gouë koelte van tuinwoesten groei, ’n
plek open in zon, blankten wat rijtjes narcissen áán, of
vruchtboomen in nabloei, purperend en sneeuwend, met
zwoelenden geur-adem. Gloed zong van kastanje-kroonselen, die te
geuren ijlden in ’t teer-heete Junigoud. En sterker kwamen uitranken
verderop, zangerige lila-trossen, en kranzen hooger. En enkele
seringen buiten de zon, slankten verbroosd in vochtigen wasem van
gebroken zilverende lichtsfeer, koel.—
Op zoog de beukenlaan, vóór Van Ouwenaar’s landgoed,

geurzwijmel van woesten tuin, die ijl te ademen hijgden. Seringen-
adem en jasmijnen, dennengeur, en vochtige boschzoetheid, stoof in
zacht en zwijmel naar de lichtgrot, tusschen al hoogzingender groen
van jong geboomte uit jonkheer’s landgoed.
Als laatste dagpracht van lentefeest, geurde de beukenlaan,

volgedronken van zwoele arooms uit tuinbrok, zwommen in gons,
zang-teer de bijen en vliegen rond, ging lentezwijmel ten offer aan
het licht, het licht dat gloeien en koken wou, naar de gouên grot, aan
’t laan-eind. In zalige weelde, glansde en praalde ’t daggoud, vonkte
’t licht, klaterden de kleuren van bloemen, rond grond en boomen,
lag Wiereland honing te zwelgen uit gouden bloeme-schalen, in
geuren-zoet te zwijmen, in rook van licht en vocht. En overal juichten
en klaroenden de vogels hun zilveren zang door het groen. [339]
Kees was wat later opgehouên dan anders. Er waren karren met
bakken van de haven teruggehaald. Piet had gevent, goed verkocht,
en Kees had van Dirk ’n gulden boven z’n zweetloontje gebeurd.
Noodig voor z’n hongerend nest van dertien, waar ook nù nog,
gevochten werd om broodkruimels.—Voor ’t eerst, met wat geld in
z’n zak, stapte ie naar ’t duinkrot. Stil laat-lichtende lanen liep ie
door, blij met ’t groen, dat ie eerst niet gezien had. Nou was ’t net, of
er iets in z’n ruw leven, z’n driftziel, verzachtte tegen alles. Er woelde
een geur om ’m heen van zoetheid, ijle reuk van bloemen, en er was
iets blij’s in ’m, als hield ie toch van ’t leven.—
Luidloos, in prachtstralende zinking van licht was de vroege

Juniavond om ’m, aan ’t sterven.—Jonge popels lichtelijk bebladerd
slankten ver in avondrood, zachten gloed die als reuzige glansschild
d’aard kwam overdekken.—
Rag en éven groen-verdonkerd lijnden de twijgen in ’t rozerood en

stille murmeling van zoet landgeklank ruischte van akker-verten àf,
als fluisterde nachtleven rond z’n beenen.—Zalig en zoet geurde
bezonken dagzwijmel na, de aarde glansgroenend en
glansvergouênd in droom-rozigen luchtbrand van zonnezink,
madonna-gouïg en heilig ver-aureolend door laantjes en boomblâar.
Dennetjes, licht-groen gezoomd aan donk’re takkransen, stonden

dwars doorlicht in rooien gloed, als heilige kandelabers in reuzige
kathedraal zacht te branden, met de jonge kaarsjes tot den top in
vlam geploft, zacht-glanzend, roereloos kaarselicht, aangestoken in
’t wonder-teere avondgoud. Aan wegkanten van weiland en
glooiigen duingrond, bloedde éven doorvlamd fijn rood gepunt van
eiken hakhout, teer als bladknipsels, looverig rood getintel, dat
arabeske lijntjes droop van zonnig rood door ’t struikgroen. Fijn
paarse hondsdraf toortste, lichtelijk gekringd in stoetjes, in ’t avond
droom-fijne glanslicht, levende wezentjes, zelf bestarend den
zonnezink. En rond, in verre kransen, kroop bijéén in ’t lokkende
goud-zachte gevlam de eereprijs, heel teere blauwe lichtjes,
dwaalzwammetjes in ’t grazend innig-schitterende weigroen.—Als
weggewaaide [340]kleurvedertjes van zwaluwstalig licht, stipten en
trilden ’t blauw-zilverige avondgebloemte in de glanszonne, maar
lichter, weeker van wéérgloedjes, tusschen de blanke boeketjes van
geel-kransige madeliefjes en akkerkoorn, die heel broos, heel blank
kuste ’t licht.—Teer wit, in blank gevloei van licht, al teerder en fijner,
zilverden de witjes-madelieven òp tusschen het schitter-fijne
vergelend gras. Van alle kanten staarden uit den wond’ren
lichtstroom van ’t goud-doorzeisde grasgroen, de bloemgezichtjes.
Overal zongen laat licht, en laat doorgloeide kleuren in den
volstijgenden lentetooi, en ’t diep violet, ’t purper, ’t rood, vloeide en
deinde tusschen ’t dauwende avondpaars. En ’t landschap zong in
avondvergouïng, met keeltjes van duizenden harpenaren.
Tusschen wilgenzilver en abeelensneeuw ging suizeling, die

fluisterde dat lente sterven moest, ging laatste tril nog, in zoete
koortsigheid van grondgeur en jong gras. Hoog, uit de boomen, van
kruinen en dieperen avondglans, zong jubel plòts van nachtegaal,
afscheidszang aan lente.
Tusschen de zoete zomergeuren van wei en tuin en lichtval, die

tooverde roodgoud rond de struiken,—overgoude stof die
verwasemde de avondstille wegjes, rood-zandige kronkelpaadjes en
nauw-door-elkaar harpende boomen,—zilverde neer hun lyrische
jubel.—
Laag op wilgentak, grauwde klein lijfje van nachtegaal. Z’n oogjes

glansden nog van avondrood geluk, en staar en stil, luisterde ze
naar triolenden lokzang, uit eigen wond’re zilverkeeltje, lokzang
opgroeiend in de heilige landstilte, tot zuiltje van parelend kwinkeleer
en zoet tierelier.—Teer verhaperde eerst nog z’n lokkend vleiend
fluitkeeltje, z’n kristallen gorgeltje, wat zangerige weemoeds-
neuriing. En telkens brak z’n liedje, verstomd stil-staand in de
vergoudende avondrust.
Dan plots borrelde zilveren tremolo, ’t kristallen keeltje òpzwellend in

klank-zoet vleiend streelewijsje. Oogjes glansden rooder in gloed,
z’n kopje luisterde zoet. Weer zette dierke in, kwam er smachting in
’t streelewijsje, spoot ’n trillenspartel [341]jubelend hoog, borrelde
voller, klare zilveren toontjes in ’t kristallen gorgeltje. Al luider en
zoetvloeiender beefden de slagen òp uit z’n keeltje, kristallige spartel
en fonkel; al passiënder zwòl de jubel.
Zwijmelende zange-wellust van minnaartjes-drift stortte uit, een

kristalweb van zilveren trillers, en hoog in de lucht sloeg áán een
golf, ’n zoet, zacht, rillend, weemoeds-deinend, jubelend, spartelend
scherzo, klaar als tingelden en klingelden klokjes van kristal,
eind’loos hoog in den hemel rond.
Dan stilte plots; ’t dierke, wèg in eigen jubel, de oogjes rood in

zonnetoover, een takje lager huppelend rond wilgenzilver.
Van verre ruischte hevig-zacht nu, zangestem van aeolus uit

serafientje, een ruischend gevloei van lichte aanslagwijsjes, héél
roffelend-teer, in de diepte van andere keeltjes.—En sterker parelde
’t ààn, kristallen golfjes-ruisch in gouden zomeravondstilte.
Als in druisch van regenkristalletjes, stortten tegen elkaar in

nachtegaal en merel, zanglijster en leeuwrik, zang en kweel van
allen kant.
Sterfhymne aan de lente.
Uit hun donkre, grauwe nachtegaal-borstjes bleef klinken de snik van

’t minnen, ’t zoete lieven; door hun grauwe stille borstjes ging één
kramp van uitstortend jubelgeluk. En engelenkeeltjes filomeelden in
zoeten jubel mee, hoog, van uit ’n hemelschen toren.
Avondschemer donkerde neer over de zoete murmelende landstilte.

Rond het laatste luchtenrood weefden de kristallen vogelen-
gorgeltjes hun webjes van minnebegeerten. En donkerte rondom
zonk uit, de schemer. Als zachte streken op violenkwint, fluweel-
streelde, weende in ’t duisterend groen hun zanggekweel na. En als
kinderkoortjes vèr, in gewijd lied, doorhuiverd van heiligen klank,
tremoleerden terug, uit andere avondlijke schemerboschjes, broozer
en reiner de vogelenkeeltjes, weenend van weemoed naar God.
[Inhoud]
MENSCHENWEE
[Inhoud]
MENSCHENWEE
ROMAN VAN HET LAND
DOOR
IS. QUÉRIDO
HAARLEM
DE ERVEN F. BOHN
Derde Boek
ZOMER.
[1]
[Inhoud]
EERSTE HOOFDSTUK.
Zachte vlekjes rood, donkere en lichte purpering,

schemerden tusschen de vèr-groene, licht-
verstuivende aardbei-akkers, onder laag blad uit. Door
veld en straatjes van Wiereland en Duinkijk, dampten
overal geuren, kittelend-arômig en reseda-zoet, van
aardbeivrucht; zingende aroma van jonge groenten en
frisch-kleurige doppers. De grond, doordrenkt van pas
gevallen regen, wasemde aardvocht uit, verschen
grondgeur, als was er mijlen in ’t rond geploegd. De
lucht koepelde in zilvering van wolken en zonnebrand.
Overal op de akkers was druk jagend gezwoeg. Kerels
in rooidrift, groeven de aarde op, voor zich uitwolkend
damp en zandig stof. Hurkende grondwerkers en
wieders stramden in buk en knieling, dat hun lijven
radbraakten van hitte-uitputting en ploeter. Geuren
zoete rook van pieterselie en jonge selderie, vloeiden
áán uit den grond, woeien door ’t land, de tuinen, en
alles zacht, kwam in bloei en ranken groei de aarde
uitzwellen.
Grove werkershanden, verbronsd, verklauwd, asch-

groenig van aardewroet, graaiden door het jonge
leven, dat bevloeide hun vingers met sappen en
aroma’s van al soorten teelt.—
Geldersche maaiers, in donkere kleeren, met klein

zwarte hoedjes op ernst-koppen, stapten al vroeg uit
de goudbevonkte paadjes, met zeis op den rug, den
polder in, of havenkant òver. Langzaam in gebaar,
enk’len met uitgebogen beenen, de zenboomen
vastgehaakt bij langen dol, ging hun rustig-rhytmische
stap vlak langs het aanhittende akker- en
havengewoel, streepte hun zeis-staal goudvlammen
door de lucht, hoog, tegen prachtgroen van gras en
boomen. [2]
En telkens weer doken donkere ernstige maaiers,

zwijgend in stap, naast elkaar, stille, goudene
weggetjes uit, laantjes met paars-zandigen grond, in
zonnegloed kleurhoog verhit; vlamden boven hun
donkere schouders de zeisen, als droegen ze
verzonken in extaze-kijk, zonnetoortsen rond, door
vrome stedeke-plek.—
In hoogen zonschitter en diepe luchtblauwing trokken

de dagen één na één over de velden, met soms
snikheete gloeiing, op middag-uren.
Drukker en woeliger werkjacht begon er áán te

koortsen in Duinkijk, Wiereland en rondom tuinders-
en kweekersdorpjes.—
In de avonden, door de rood-goud doorzonde

schijnsels als van brandende kathedraalglanzen,
trokken van alle kanten òp, werkers uit verren omtrek,
met karren vol kisten naar de haven van Wiereland,
waar alles heen moest, in laten zomeravondzwoeg.—
In rateling bonkten en dromden de hoog-beladen
karren en wagens door de stille straatjes, waar
knussige renteniertjes in lieve voortuintjes, van
dagsloof en arbeidje uitrustten. Laat dromden de
kerelslijven áán, in zwoegenden hijgduw, zweet
doorzogen en kreunend achter hun kleur-felle hoog
geladen vrachtkarren, twee mannen vooròp, met
snoerende touwen over rugkromming gesjord,
trekkend aêmechtig, doorvloekt van gramschap, van
hevigen sjouw en woest spierzwellende inspanning.
Hun zweet-druppende gezichten gloeiden rood-brons
tegen het zonnezinken in, den haven op; hun
afgemartelde zweetlichamen verstonken in rottende
plunje.—
Een volle werkdag lag al àchter hen; nu kreunden hun

borsten achter d’r karren.—Angstig keken hun oogen
uit, tusschen de breed-uitgestapelde sappige
kleurweelde van hun geur-versch, jubelend groente-
groen en pralend wortelen-rood, bang ergens tegen
aan te bonkeren. Zoo, met hun doormodderde
verzweete kleeren, doorstoofd van schroeiend
zonnevuur, als wroetende dieren, besmet met korsten
van grondvuil, doorzogen van zweet, uitgegrauwd van
dag-zware ploeterramp, stapten ze tusschen hun
fleurige kleurschaterende waar, boot [3]op, boot af,
langs de haven. Van den polder uit woei zoelzoete
hooigeur aan, en soms al, waggelden goud-matte
wagens in langzamen stap van schonkig werkpaard,
door de kleine drukke zomerdagstraatjes,—in hun
geweldigen opbouw boven de huisjes uitzwellend, als
versleepte duinruggen, mat goudgroenig nog van
gras-verschheid.
Heete drang koortste rond, onder de landwerkers om

elkaar vóór te zijn op de markt, met groenten.
Enkelen, vroeg met wat bakken werkend, vervoerden
in stillen trots wortelen en tuinboonen, en hier en daar
stonden al wat mandjes met aardbei uit de zon, zoet
te purperen, zangerig rood, koester-diep karmijn, in al
verspringende gloedtinten, van geranium-vuur naar
dahlia-purper.
Ouë Gerrit was naar de grasveiling en ’t etgroen

geweest. Hij had twee dijken hooi gekocht; te duur,
veel te duur, maar ’t moest. Nijdig nou op zichzelf was
ie, dat ie twee dagen lang daar geloerd had, om ’n
kandelaartje, in de zaal machtig te worden. Z’n heele
zaak had ie ’r voor vergeten. Zoo had ie op ’t end ’n
veel te duur dijkbrok gekocht. Toch praatte ie zich in,
dat ’t nooit goedkooper zou zijn gegaan, omdat ’r zoo
bar prijzig weer gevochten was. De boeren en tuinders
op de veiling hadden elkaar met haat en woeste
afgunst, de hoogte ingejaagd, zoo erg, dat de
landheeren lachten in hun vuistje, de bode listig
knipoogde tegen notaris.
Voor tuinders nu ook, werd ’t vroeg hooien. Dreunvol

en zwaar klonk er klomp-geklos overal. Druk gedrentel
van blank-geschuurde, gloed-nieuwe en vuile klompen
op klinkertjes, weerhalden.—Ouë en nieuwe karren
verwemelden in gezwoeg met trekhonden,
vermartelde, woeste, bloedoogige beesten, heen en
terug van haven naar tuin.
En vròeger, iederen dag poerden de tuinders al op

hun akkers, met zenuwjacht en koortsige werkdrift in
de handen, niet wetend wàt eerst te doen, zóó, in
woesten overvloed kwam groei van al soorten gewas
op woekeren.
Iederen dag drentelde Gerrit ’n beetje mee op ’t land.

Maar morrend giftten en bitsten Dirk en Piet tegen ’m,

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Financial Reporting Financial

Statement Analysis and Valuation 7th

1. The objective of forecasting is to develop

Sparky’s Selected Financial Statement data

Inventory $31,353 $30,850

Sparky’s Selected Financial Statement data

Inventory $31,353 $30,850

13. Card Sharks, Inc.

14. Card Sharks, Inc.

23. Common-size financial statements recast each statement item as

30. Realistic expectations are ____________________ and ____________________.

Glad Rags, Inc.

Inventory $ 5,548 $ 4,948

Goode Corp. Consolidated Statement of Income

Net Revenues $345,871

Goode Corp Consolidated Balance Sheet

Liabilities and Stockholders' Equity

A. See the information for Simmons Company.

B. See the information for Simmons Company.

Repair Specialists 2009 2010

The following summary information relates to Techtronics’ property, plant, and

Techtronics (amounts in millions) 2009 2010

60. Arco is an integrated manufacturer in capital-intensive industry. Nuwak manufactures more

($ amounts in millions) Year 3 Year 4

Saunders Corporation (amounts in millions of dollars) 2009 2010

b. Repeat requirement a. for selling and administrative expenses.

a. Compute the inventory turnover ratio for Benson for 2010.

1. The objective of forecasting is to develop

Sparky’s Selected Financial Statement data

Inventory $31,353 $30,850

Sparky’s Selected Financial Statement data

Inventory $31,353 $30,850

13. Card Sharks, Inc.

14. Card Sharks, Inc.

23. Common-size financial statements recast each statement item as

30. Realistic expectations are ____________________ and ____________________.

One disadvantage is that it may introduce artificial volatility in ending balances.

The seven steps are:

1. Project revenues from sales and other operating activities.

Suggested Solution from the text::

Cost of Goods Sold:

Gross Profit 1,170,907 1,317,345 1,538,999

Glad Rags, Inc.

Inventory $ 5,548 $ 4,948

a. Inventory Turnover 6.85

Annual Average Days Sales Year-end

2012 2013* 2014* 2015* 2016* 2017*

Sales Growth Rate 6%

Growth in A/R 9.90% 2.48% 9.46% 2.81% 9.09%

Sales Growth Rate 6%

Yearly Growth in A/R 9.90% 2.48% 9.46% 2.81% 9.09%

Compound Average growth in 6.69%

Beginning Balance $791 807 861 919 980 1,046

Growth in A/R 6.69% 6.69% 6.69% 6.69% 6.69%

Net Revenues $345,871

Goode Corp Consolidated Balance Sheet

Liabilities and Stockholders' Equity

Goode Corp. Consolidated Statements of Income

30. Realistic expectations are and .

30. Realistic expectations are and .