UR Company Is Preparing a Forecast of Its Net Income

question 11

Essay

UR Company is preparing a forecast of its net income for the year 2011. In addition, UR plans to construct a forecasted statement of cash flows for 2011. The balance sheet and income statement data for 2010 are presented below, as well as a forecast of the balance sheet for 2011. Management expects sales in 2011 to rise to $6,000,000. In order to achieve this level of increase, management estimates that operating expenses (specifically sales commissions) will rise to $410,134.
Prepare a forecasted income statement and forecasted statement of cash flows (using the indirect method) for the year ended December 31, 2011, for UR Company. Calculate the cash flow to net income and cash flow adequacy ratios. There were no changes in stockholders' equity other than net income and cash dividends.

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