Developing Pro Forma Financial Statements and Cash Flows
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Developing pro forma financial statements and cash flow forecasts depends heavily upon sales forecasts. Imagine you are a financial analyst working for a major stockbroker and you are trying to develop a one-year sales forecast for a major national department store.
List five pieces of information you want to obtain to aid you in your forecast, explaining why this will aid you in your forecast.
Now you have made your best prediction of next year's sales you want to estimate next year's cost of goods sold. Pick two pieces of information you definitely want to obtain in order to help you with this task being sure to explain why they will be helpful.
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Solution Summary
The solution assists in developing pro forma financial statements and cash flows.
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Sales forecast
Sales forecast is a very important factor in a firm's planning process (Keown, 2002). This projection would impact many other areas in the firm's financial position such as expenses, revenues, and profits. Sales forecast would basically determine whether the company needs to make adjustments in its production and consequently, inputs or resources necessary for production.
To be able to forecast sales, the following information are needed:
1. Past trends in sales
Forecasting may be described as determining future events based on analysis of past events. As such, the basic step in forecasting sales is to look into the past sales trend that may be carried over to the future. The average percentage change in sales during the period studied is obtained - such percentage will be applied in determining forecasted volume of ...
Education
- Bachelor of Science in Business Administration, University of the Philippines
- Master in Business Administration, Saint Mary's University
- Doctor of Philosophy in Education, University of the Philippines
- Doctor in Business Adminstration (IP), Polytechnic University of the Philippines
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