The Financial Forecast Essay

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Learning Team B Week 4
Yuri Aguilera, Amador Ferrer, Mark Neumann, Henry G. Sharpolu
FIN 571
October 18th, 2014
Professor David Aloyan

Financial Forecast for XYZ
The initiative that team B will be implementing over the next five years: XYZ will develop, produce, market and sale another product.
With the explanation, we are attaching two excel spread sheets that analyze both the Balance Sheet and the Income Statement as pro forma documents for the company. This means they are being used as forecasting tools to view the overall percentage for the next 2 years, giving a 5 year view of the growth picture based on the percent of sales condition of the firm from a financial perspective, given certain assumptions about the company’s growth. In this analysis, the assumption regarding growth is 20% for the first 3 years, then 10method. Let us assume that percent of Sales represents 100% of the performance of the firm. We will then consider all calculations to that figure - meaning that as sales increase, other items will increase as well. For instance, if sales increase, then the cost of sales must also increase. This means that the more products we sell in the business organization, the more raw materials we will purchase, therefore increasing our ending inventory. Sales expenses will increase, as will general administrative types of expenses. In addition, we will pay more in taxes based upon improved performance.
You will note that we calculated ending profit at the same percentage as the current value. However, based upon sales increases and the hope that we can control expenses somewhat better through more thorough management techniques, we ought to establish a method which should allow us to purchase inventory more efficiently, thereby lowering those costs. In addition, if we continue to earn a profit in the firm, thereby keeping the firm in a cash flow condition, we should be able to reduce borrowing expenses, and eliminate current loans to a very real degree. This would be the revolving line of credit shown on the financials.
Also note the compounding effect of the sales figure - when we assume these types of growth figures, they have a compounding effect, due to the second year 20% growth based upon an already 20% growth figure from year one. The key fact to consider is the control of expenses as we maintain the growth in sales. Another item in need to be
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