Your pro forma income statement shows sales of $ 1 comma 000 comma 000, cost of goods sold as $ 500 comma 000, depreciation expense of $ 100 comma 000, and taxes of $ 160 comma 000 due to a tax rate of 40 %. What are your pro forma earnings? What is your pro forma free cash flow? Complete the pro forma income statement below: (Round to the nearest dollar.) Sales $ 1000000 Cost of Goods Sold $ (500000) Gross Profit $ 500000 Depreciation $ (100000) EBIT $ 400000 Taxes (40%) $ (160000) Earnings $ 240000 The pro forma free cash flow will be $

The correct answer for proforma earning is $240,000 and proforma free cash flow is $340,000.

Explanation:

According to the scenario, the computation of the given data are as follows

Sales  = $1,000,000

Cost of goods sold  (Less) = $500,000

Gross Profit  = $500,000

Depreciation (Less) =  $100,000

EBIT  = $400,000

Taxes [40% × $400,000]  = $160,000

Proforma Earnings = Sales - Cost of goods sold  -  Depreciation - Taxes

= $1,000,000  - $500,000 - $100,000 - $160,000 = $240,000

And we can calculate the proforma free cash flow by using following method:

Proforma Free cash flow = Proforma earning + Depreciation Amount

By putting the value, we get

Proforma free cash flow = $240,000 + $100,000 = $340,000

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: