GAMES UNLIMITED

Games Unlimited



Games Unlimited

Case Background

This assignment requires that you prepare an initial spreadsheet (PFIS1) containing an income statement for the year just ended (2010-11) calculated from the information provided in the tables below. You will also calculate three future years (2011 to 2014) using assumptions that have been provided. You will then repeat 2011 to 2014 based on a different set of assumptions. You must also submit a 5th page showing PFIS 4 in full formula view.

NOTE: Each new sheet based on a given set of assumptions (scenario) should be reset to the initial PFIS and for each scenario, do not calculate new assumptions on top of previous assumptions.

Games Unlimited develops software for personal computers. Due to worldwide competition, Games Unlimited is struggling to survive. For the past two years the business has borrowed money from its bank and has always been able to make the loan repayments. Every year since 2005, the managing director and owner of the business Wayne Harrison has prepared his current-year financial statements and from these has made further three-year projections in order to predict how his business could be performing for the following three years. While Mr. Harrison has some personal funds available, he will need to continue to negotiate a loan from a bank. Before approaching any bank, he knows that it is a good idea to prepare several forward-looking financial statements in order to predict his trading position under a range of possible future business scenarios. If Mr. Harrison wishes to continue operating this business he needs to prepare these statements to support and strengthen his loan application. Mr. Harrison wants a current-year (2010-11) income statement prepared from the trading figures which are provided in Table 1 and on the same spreadsheet you are to project three further years' figures using the growth projections and other stated variables in Table 2. This table is also known as the “assumptions” table and all possible variables should be placed in this table so that changes can be made here, and the results viewed in the main table.

Case Scenario

Games Unlimited is a relatively new business that has been in operation since 2004. Although Wayne Harrison is very active within his business, he does employ a software projects manager and he has 5 full-time software developers/programmers. The Project Manager is paid a fixed annual salary, and the Programmers are paid an hourly wage. Programmers enjoy their work and in the beginning you should assume that they will work 60 hours each week for 50 weeks in each year.

Table 1: Games UnlimitedPro Forma Income Statement (PFIS)

Year-end April 2011

2012

2013

2014

Sales revenue (annual)

Software Development

Assume 34 percent of total sales each year.

Licensing fees

Assume 40 percent of total sales each year.

Software Maintenance

Assume 20 percent of total sales each year.

Customer training

Assume 6 percent of total sales each year.

Total Sales revenue

£476,332.18

(four hundred and seventy six thousand, three hundred and thirty two pounds and 18p) in total sales year-ending April ...