Tire City Reflection

Tire City Reflection

Tyler Piotrowski

MBA 634

        In order to create the proforma income statement and balance sheet I was able to see the trends that occurred from year to year before creating the estimates.  After calculating the net sales throughout 1996 and 1997 based off from the 20% increase of net sales that was expected, that value was used for a majority of the rest of the calculations that I used when checking for trends in the data from year to year.  

After reading Higgins description on how to spot some of the trends, I realized that it was not only the Net Sales that some of the data was based upon as some values were constant patterns based upon the previous year or even based off the total such as the total assets.  I found this exercise very difficult as much of this was trial and error as many times there was very little correlation between the values so I had to look deeper and go back to the reading to see if there was another trend that I should be following.  

Overall, I found this very helpful in looking towards future projections in cases such as this where you have a business that is projected to do well and finding out possibly how much cash flow you have and how much you can budget in each area of the income and balance documents.  By using these projections, you could set “limits” to the amounts of account receivable that you allow, the levels of inventories you should keep as well as how much money you can expect to make overall if you stick to those ratios! I found it very interesting as well that most of the numbers within the problem when calculating relates back to the net sales, which in the end makes sense as everything in a business is relatable to how much cash intake is occurring.

I think it is also interesting how this method points out that your assumed liabilities are also growing as your assets and net sales increase which is important to mention as if you do not take this into account then you may be projecting to spend more money then you will really be making.  In this case you would be projecting an increase in liabilities which may occur, or may not which would only mean higher on hand cash value of the business.