Question

VII. Report for CEO

At the most recent strategic planning meeting, the board of directors of the Home depot has voted to issue additional stock to raise capital for major

expansions for the company in the next five years. The board is considering $5 billion. Take the most recent financial statements and prepare a set of

projected financial statements based on the given assumptions. The CEO requests that you prepare a written report (including the financial statements)

for her.

A. Generate a projected income statement based on the given scenario.

B. Analyze the impact on the income statement based on the given scenario.

C. Generate a projected statement of retained earnings based on the given scenario.

D. Analyze the impact on the statement of retained earnings based on the given scenario.

E. Generate a projected balance sheet based on the given scenario.

F. Analyze the impact on the balance sheet based on the given scenario.

G. Generate a projected statement of cash flows based on the given scenario.

H. Analyze the impact on the statement of cash flows based on the given scenario.

Answer 1

Proforma Invoice

A Proforma invoice refers to a document sent to the buyer by the seller before the shipment or delivery of goods. This bill of sale document states the description of the goods to be purchased by the buyer such as quantity, price per unit, quality and features, sales terms, the costs of the goods, shipping weight, freight charges. This invoice is generally used by the customs officials on imports at the destination port.

A Proforma invoice is different from the price quotation which is used for bidding contracts. However, in both the cases, the terms of sales changes as per the mutual agreement between the buyer and the seller. All types of companies use this Proforma invoice in their trade transactions.

A Proforma invoice is useful to the buyer as it gives a precise sales price such as any commissions or fees, applicable taxes, shipping costs, or any other additional costs associated with the sale. Despite the sales terms are subject to change, it is provided in good faith as an estimation of the goods to be purchased to clear the buyer that there are no hidden or unexpected charges to be levied on the completion of the sales transaction.

The Proforma invoice is sent before the shipment to buyer based upon the agreed quantity of goods to be delivered. It contains the accurate costs of the goods to be shipped; however, it does not provide details of any payment terms.

Format of the Proforma invoice

There is no uniformity in making a Proforma invoice, and thus, there is no certain format. The presentation of the invoice differs from companies to companies as well as industries to industries based on their nature of sale.

However, the most common format of the Proforma invoice appears to be:

Proforma invoice versus commercial invoice

The presentation of the Proforma invoice is quite similar with the commercial invoice. But it differs in the following ways:

• Proforma invoice is used before the sale of goods while commercial invoice is used after the sale to record the sales transaction.

• It is used when the sale transaction is not officially completed that means a certain portion of the payment is due till the goods delivered to the buyer. Whereas as the commercial invoice is sent stating the completion of sale.

• Proforma invoice requires less information as compared to commercial invoice to fulfill customs duties.

• Commercial invoice requires complete details of both buyer and seller as well as the goods while the Proforma invoice requires complete details of the goods and the buyer.