1. Net Sales are expected to increase 11.6 percent.
2. Gross profit margin is expected to decrease slightly from 29.8 percent of net sales in 2005 to 27.5 percent in 2006
3. There is a 19.4 percent increase in selling and administrative expenses. This seems high, relative to the sales increase; perhaps R&D expense in increasing
4. The net effect of the foregoing is an anticipated decrease in profit before taxes. Profit would be increased by judicious reductions in the anticipated selling and administrative expense, or by actions to restore (or improve) the gross margin percentage.
5. It is expected that more funds will be tied up in inventories. Inventory turnover in 2005 was 2.82 times; it is projected at 2.55 times for 2006. Why the slowdown (about 13 days’ increase)?