Complete Ramsey Walker’s profit plan Essay

Work assumption1. Assume that the sales will improver by 10% for to each one(prenominal) new title, as indicated the Backlist sales increase.2. Assume that the total number of new titles remain unchanged since Ramsey is nerve-wracking to publish fewer segments and focus more resources on trying to publish fewer segments and focus more resources on differentiation those books in the marketplace, there is no reason for him increase the new titles.3. Assume that they aim to increase their gross margin by 2% and decrease the expenses of sales by 1%, for each of the six initialises, as given for Backlist.4. Assume that AR as the percentage of sales remains 20%, as indicated by Backlist.5. Assume that inventory as the percentage of sales decrease by 15%, as indicated by Backlist.6. Assume that AP as the percentage of sales will stretch to 20%, as the last social class percentage for the first five formats is 18%.The 10% increase in sales, 2% increase in GM and 1% decrease in expens es should be diminutive since it will increase the pull ahead dramatically. And the decrease in inventory is excessively critical because it will decrease the lower character of the ROA formula. Since the overall goal of the profit plan is to achieve the 10% increase in ROA, so the preceding(prenominal) assumptions will directly affect the end results.Problem 2 Review the list of financial public presentation measure presented above. What measures or calculations should Ramsey use to treat the business? How should those measures be reason?1. Annual sales increment rate should be used to measure their performancebecause this rate helps management to evaluate the quality of their decisions and also helps to make the new strategy for the in store(predicate) development. It is calculated by suing the difference between current year sales and previous years divided by the previous year sales.2. Profit % is the most critical measurement of a business performance. Without profit or potential to earn profit in the future there is no meaning for a business to continue. It is simply calculated by using profit divided by the sales.3. Average unit sales help the company to find the right format which is more profitable and more popular, and affect the companys future strategies. Using the total units change for one format divided by the total titles in this format.4. Operating expenses passel help them to manage their cost control system, OP can be calculated simply sum up all the expenses in the income statement.5. POA and ROI are hard to control and too complex to analyze. But these measurements can be calculated by dividing the profit by total asset or total investment respectively, different results can be achieved by suing different assumptions.Picture Photo B & W Nonfiction Fiction BacklistIncome biddingNumber of New Titles 5 3 1 7 7 0Sales 426,933.10 122,314.00 50,589.73 218,156.40 256,171.30 1,200,000.00COGS 127,672.00 39,591.50 19,644.67 63,200.00 71 ,302.00 384,000.00Royalties 58,218.00 16,679.00 6,898.67 29,749.00 34,933.50 180,000.00 double-dyed(a) Margin % 56% 54% 48% 57% 59% 53%Expenses % of the sales 53% 54% 54% 54% 54% 47%Expenses 226,584.30 66,049.53 27,318.39 117,804.10 138,333.20 564,000.00New Income 14,458.83 -6.083 -3,271.99 7,403.34 11,602.61 72,000.00Balance sheet May 31, 1998Current Assets size up 39,892.20 40,119.15 10,933.55 36,187.90 65,747.50 500,000.00A/R as % of Sales (projected) 20% 20% 20% 20% 20% 20%A/R $ 85,386.62 24,462.79 10,117.95 43,631.28 51,234.26 240,000.00Total current Assets 125,278.80 64,581.94 21,051.50 79,819.18 116,981.76 740,000.00Current LiabilitiesA/P as % of Sales 20% 20% 20% 20% 20% 0A/P $ 85,386.62 24,462.79 10,117.95 43,631.28 51,234.26 0Royalties Payable 0 0 0 0 0 0Total current Liabilities 85,386.62 24,462.79 10,117.95 43,631.28 51,234.26Free Cash melt (= Net Income +/- Change in Net working Capital)Net Income 14,458.83 -6.08 -3,271.99 7,403.34 11,602.61 72,000.00Change in Net Wo rking Capital 39,892.20 40,119.15 10,933.55 36,187.90 65,747.50Free Cash Flow 54,351.03 -40,125.23 7,661.56 43,591.24 77,350.11 72,000.00