771627749.

xls

Financial Statement Forecasting

This is a basic example of financial statement modeling. Such models are built for general forecasting purposes,
including financing needs and credit analysis.

In this example, a company has a fairly healthy forecasted cash flow for 2009, but also aims to reduce its long-term
debt in 2009 to $70k from $97k in 2008. The company is forecasting that in the base case its financial position will
be sufficient to do this. However, it wishes to analyze the probability that a short-term financing facility will be
needed. The short-term debt (which is zero in the base case) is therefore set as an @RISK output, and the
probability that it is non-zero can be seen both from the Results Summary window, and also from the RiskTargetD
function built directly into the model sheet.

Income Statement Forecast Method 2007A 2008A 2009E

Sales Growth rate 950 1000 ###
NA 5.3% ###
Cost of goods sold As % sales 625 645 ###
65.8% 64.5% ###
Selling, General and Admin Costs As % sales 210 215 ###
22.1% 21.5% ###
Depreciation As % prior net PPE 47 50 ###
NA 17.2% ###
Operating Profit (Calc) 68 90 ###
Interest Expense (net) As % prior net debt 5 6 4
NA 8.0% 8.0%
Taxable Profit (Calc) 63 84 ###
Tax As % taxable profit 19 25 ###
30.2% 29.8% 30.0%
Net income (Calc) 44.0 59.0 ###
Dividends % of net income 13 17 ###
29.5% 28.8% 30.0%
Retained Earnings (Calc) 31 42 ###

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Balance Sheet Forecast Method 2007A 2008A 2009E

Cash As % sales 20 25 ###
2.1% 2.5% ###
Short-term investments (Balancing item) 10 20 ###
Inventory As % sales 100 110 ###
10.5% 11.0% ###
Accounts receivable As % sales 70 75 ###
7.4% 7.5% ###
Total current assets (Calc) 200 230 ###
Net PPE As % sales 290 310 ###
30.5% 31.0% ###
Total assets 490 540 ###

Accounts payable As % sales 80 84 ###

8.4% 8.4% ###
Taxes payable (Calc from IS) 19 25 ###
Dividends payable (Calc from IS) 13 17 ###
Short-term debt (Balancing item) 10 2 ### #ADDIN? @RISK Statistics (RiskTargetD function)
Current liabilities (Calc) 122 128 ###
Long term debt As % operating assets 95 97 70
Total liabilities (pre-equity) (Calc) 217 225 ###
Share capital (common stock) Same as prior year 125 125 125
Accumulated retained earnings From IS 148 190 ###
Total liabilities and equity 490 540 ###

Some BS quantities required for ratios, checks, and balancing items:

BS balancing check 0 0 ###
Net debt 75 54 ###
Operating assets (excl. s/t balancing items, 400 436 ###
LHS excl balancing s/t/investments ###
RHS excl. balancing s/t debt ###
Amount required to balance (+ve=extra assets) ###

Cash Flow Statement Forecast Method 2007A 2008A 2009E

Operating

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Net income ###

(+) depreciation ###
(-) increase in inventory ###
(-) increase in accounts receivable ###
(+) increase in accounts payable ###
(+) increase in taxes payable ###
Sub-total: ###

Investing
Investment in PPE (increase in net+depn) ###
Sub-total: ###

Financing
(-) Increase in short-term investments ###
(+) Increase in short-term debt ###
(+) Increase in long-term debt -27
(+) Increase in common stock 0
(-) Payment of dividend 17.0
Sub-total: ###

Net increase in cash (from CFS) ###

Net increase in cash (from BS) ###
Check: ###

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atistics (RiskTargetD function)

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