The Body Shop International PLC 2001: An Introduction to Financial Modeling The following graph presents the forecast for the Body Shop’s income statement and balance sheet in 2002 to 2004: How did you derive your forecast? Why did you choose the “base case” assumptions that you did? The forecast takes into considerations the stated business objectives of the Body Shop as well as trends or patterns in the historical financial statement in exhibit 8. Further information on the calculations and assumptions underlying the forecast is to be explained for each account individually in the following section: Assumptions related to the sales growth, expenses and earnings parameters Sales growth: Given the Body Shop’s growth level of 20% in …show more content…
The restructuring costs are forecasted to be £6.8 million per year which is the weighted average of the stated restructuring costs in 1999, 2000 and 2001. The operating expenses excluding exceptional costs: Even though the Body Shop’s business strategy is to achieve a higher level of operational efficiencies, it is assumed that the “operating expenses excluding exceptional costs”/sales-ratio will not decrease from 2002 to 2004. There are only so many operating expenses that can be cut before the quality of the business operations is damaged. Consequently, it is assumed that the Body Shop will not be able to cut further back on operating expenses without compromising the desire to enhance its brand value. However, it is assumed that the body shop will be able to keep the ratio of 52.3 % in 2001 throughout the years from 2002 to 2004. Interest expense or income: The interest rate is assumed to be 6 % whether it is the rate for interest expense or interest income. We assume that if the plug is negative (we have excessive cash) then we earn interest at a rate of 6%. Tax: The forecasted tax expenses are based on an estimate of the tax-rate. In 1999 the tax expenses exceed the EBT which I chose not to consider in calculations for the forecast. The estimated tax-rate in the forecast for 2002 to 2004 is equal to 31.5 % which is the average of the tax-to-EBT ratios in 2000 and 2001. Assumptions related to Assets and
If we assume that the 1991 products, prices, sales volumes, materials costs and overhead are unchanged from 1990 and that there are no process improvements that would lead to a reduction in the direct labor of a product, it can be inferred that the company’s profits would be identical to those of 1990, as stated in Appendix B. However, if the same is assumed
This course focuses on ways in which financial statements reflect business operations and emphasizes use of financial statements in the decision-making process. The course encompasses all business forms and various sectors such as merchandising, manufacturing and service. Students make extensive use of spreadsheet applications to analyze accounting records and financial statements. Prerequisites: COMP100 and MATH114 / 4-4
The model analyses quarter by quarter. As off now the budget and expected revenue is as follows:
* Our company’s sales forecast has been based on performance from previous years along with market circumstances. We are looking at the future of the business objectively which we then can evaluate past to
The second task that needed to be finished was to forecast the income statement and the balance sheet for the next two years. We grew sales at a 15% rate, which is the stated rate from Koh. Also, in forecasting the balance sheet, we only showed debt financing for the capital expenditure of the DVD manufacturing equipment, which was the requested structure. Other relevant facts and assumptions for preparing the financial forecast are stated below-
This will be a basic forecast created from pro-forma financial statements, using basic forecasting procedures.
The investment requested is £12 million. Strategic and operating benefits were summarized in our previous memo to you. We have made, however, some changes to our investment analyses, which appear below.
2. Based on Mr. Martin’s prediction for 1996 sales of $28,206,000, and for 1997 sales of $33,847,000 and relying on the other assumptions provided in the Tire City case, prepare complete pro forma forecasts of TCI’s 1996 and 1997 income statements and year-end balance sheets. As a preliminary assumption, assume any new financing required will be in the form of bank debt. Assume all debt (i.e., existing debt and any new bank debt) bears interest at the same rate of 10%.
Using the assumptions given in the case, all elements of income statement and balance sheet can be projected for next three years 2010, 2011 and 2012. Sales cycle of the products of the company is such that sales of a particular product increases initially for few years and then starts to decline as the new
The full report shows all the forecasting data for 2012 – 2016, it clearly estimate the financial trend of our company (attachment). For the data used in this model, some of them are current data, the other are historical or most recently or average number. It only depends on actually situation – for which method is much more realistic.
Forecasting is the methodology utilized in the translation of past experiences in an estimation of the future. The German market presents challenges for forecasting techniques especially for its retail segment. Commercially oriented organizations are used to help during forecasting as general works done by academic scientists are not easy to come across (Bonner, 2009).
The company’s debt ratios are 54.5% in 1988, 58.69% in 1989, 62.7% in 1990, and 67.37% in 1991. What this means is that the company is increasing its financial risk by taking on more leverage. The company has been taking an extensive amount of purchasing over the past couple of years, which could be the reason as to why net income has not grown much beyond several thousands of dollars. One could argue that the company is trying to expand its inventory to help accumulate future sales. But another problem is that the company’s
* As stated in the guidelines, we also assume that the mean of the demand is equal to the product of the mean of the forecasting error and the forecast itself, and the same for the standard deviation of demand;
3. Refer to the monthly sales forecasts given in the first Table. Assume that these amounts are realized and that the firm’s customers pay exactly as predicted.
During performing the sales forecast for Victoria's Secret, I learned that for most part that Victoria's Secret has an incline in their profits. They have however hit a few bumps here and there. The causes of this could be more cost for Victoria's Secret purchasing materials and production of their products. Another reason for this could also be a slower rate in sales than usual. Like I said, for the most Victoria Secret has seen an incline in their profits and sales throughout the years. Performing the percentage of sales forecast for Victoria's Secret, I established a forecasted sales of 5 percent which means that they would have to have a sales of $2,808 compared to their last years $2,675. This is a very feasible number for Victoria Secret to achieve, considering that majority of their money in assets outweighs their liabilities.