Security Analysts Following the Witczak Corporation Use a Simplified Income

question 19

Essay

Security analysts following the Witczak Corporation use a simplified income statement method of forecasting.Assume that current sales are $30 million and are expected to grow by 10.5 percent in year 1 and 2.The aftertax profit margin is projected at 7.0 percent in year 1 and 7.2 percent in year 2.The number of shares outstanding is anticipated to be 450,000 for year 1 and 500,000 for year 2.Project earnings per share for the next two years.

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Definitions:

Common Fixed Costs

Costs that are shared by several segments, products, or projects of a company, not attributable directly to any individual segment.

Divisions

Separate units within a larger company, often structured around specific products, geographical locations, or market segments, each potentially with its own management.

Segment

Any part or activity of an organization about which managers seek cost, revenue, or profit data.

Fixed Expenses

Costs that do not change with the level of production or sales volume, such as rent, salaries, and insurance.