Proforma Income Statements
Executive Summary
The purpose of this analysis is to show how proforma planning is needed to make capital budgeting decisions. The proforma income statement will show a projected growth of net sales for Adidas of 15%. In conclusion, Adidas is continually maximizing its growth as a sports apparel industry.
Introduction
Adidas is one of many successful sporting goods apparel stores in the industry. With sales increasing from 2,708 million in 1998 to 2,718 million in 1999, they are definitely making sound capital budgeting decisions. A proforma income statement will be created to show future planning and growth.
Financial Planning
The first step in financial planning is to determine a sales forecast. The projected sales for the year 2000 will be an increase in sales of 15%. Second, a proforma statement for Adidas will support the projected sales increase to 3,125 million for 2001. Proforma means "as a matter of form," which are financial statements that summarize the different events projected for the future. (Ross, Westerfield & Jordan,1998)
Adidas Adidas
Income Statement Proforma Income Statement
First Quarter ended Mar.31,2000
Millions
Net sales 2,718
Cost of sales 1,558
Depreciation 26
Taxable Income 1,134 Taxes 1,303
Net Income 1,060
Third, an asset requirement describes projected capital spending which effects capital budgeting. So, Adidas will also be increasing capital spending by 15%. Fourth, are the financial requirements that deal with Adidas financing arrangements. Adidas has two shareholders so they will use assets instead of borrowing. The fifth part of the financial planning is the...
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