of sales method %

of sales method %

We have to determine the items that have *

direct relationship with sales

.Then divide their values by sales amount *

Proposed sales (600) Actual sales (400) Actual values F.P
15 % 2.5 * 10 Cash
135 % 22.5 * 90 Debtors
300 % 50 * 200 Inventory
450 % 75 300 T.C.A
450 % 75 * 300 F.A
900 % 150 600 T.A
60 % 10 * 40 Creditors
10 - 10 S.T loans
75 % 12.5 * 50 Acc. Exp
145 % 22.5 100 T.C.L
150 - 150 L .T. Bonds
50 - 50 O . Shares
324 - * 300 R/E
669 % 22.5 600 Total L & O.E

$ 231
 If profit margin = 10%
Sales 400 -------- PM 10 % = 40 $

-60 % Dividends ( 40* 60% = 24$ )

- 40% R/E (40*40% = 16 $ )

Sales 600 ------ PM 10 % = 60 $

-60% Dividends (60*60% = 36$)

- 40% R/E ( 60*40% = 24 $ )

 Financial sources needed
A/S1 x ∆S - L/S1 x ∆S – PS2 x (1- D )

A :- Assets
S1:- Actual Sales
L :- liabilities
S :- (S2-S1)∆
P :- profit margin
D :- Dividends
FSN

x 200 – 10% x 22.5% – )600-400( 150%

600 x (1-0.6)
24 – 45 – 300 =
231 =
We need financial hierarchy for 231$
 FSN = 0

O = 150% x (S2 – 400) - 22.5%

10% x S2 x 0.4 – )S2 – 400(
4% S2 – )S2 – 400( 127.5% =0
S2 – 510 123.5% =0
S2 123.5% = 510
S2 = 412.955 = 413
Take the decision
Before After
CA / CL CA / CL
300/100 = 145+231 /450 =
3=
1.2 =
The industry average = 2.6
Take the decision
Before After

TD / TA TD / TA
250/600 = 900 / 145+150+231 =
% 42= % 58 =

The industry average = 45%