APN Outdoors Limited Sales Forecasting and Financial Analysis
Added on 2019-10-31
7 Pages1294 Words455 ViewsType: 455
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Task 1 -Question 1ROE = NI/S × S/TA × TA/ENet Income-$24Sales-$2000Total Assets$1200Equity-$500ROE =24/2000 *2000/1200 *1200/500 =0.048 or 4.8%Task 1 -Question 2Additional Fund Needed = A0 *ΔSSo - L0 * ΔSSo - M * S1 *RRA0 =1200ΔSSo =15% L0 =700S1 =2300 M =1.2%RR=1-37.5%=62.5%AFN = 1380 – 805 -17.25 = 557.75Thus additional funds required $557.75Task 1 -Question 3Steps in Financial ForecastingOne of the most important functions of a business is financial forecasting. The mainobjective of financial forecasting is to assist businesses in the decision making processthus allowing the derivation of future goals [ CITATION Put09 \l 1033 ].
The steps involved in financial forecasting include the following-Firstly, the organization should prepare a timetable which should include theorganization’s key milestones, timeframes, and business plans.Next, the organization should review its assumptions based on their processes.The assumptions should also factor in the external factors that may affect howthe organization operates.The third step is to collect data. Sources of data include historical financialreports, revenue forecasts and departmental budgets.The fourth step is to analyze the data. This will involve building a revenueforecast, income statement and balance sheet forecast.The last step is to document all results and perform a cross check againstindustry forecast and expert opinion.Task 1 -Question 4A financial plans sets out how an organization will meet its long term organizationalgoals established by management. Organizations set a strategic long-term view viaplanning. The planning process will involve examining the organization’s currentfinancial statements and forecasts. Financial plans are also useful for coordinating andcontrolling key activities throughout the fiscal year.Task 1 -Question 5Sales Forecasts are important because they affect other departmental budget. Forexample, the sales budget may be used to determine the production level of amanufacturing company, such that if sales increase, production levels would increase,which subsequently increases the need for raw material.Given that there is correlation between sales and other budget, the sales for the nextperiod can be used to forecast financial statements. This method of forecasting isknown as the percentage of sales method. For example, if the COGS as a percentageof sales is 30%, we can assume that 30% can be applied to the forecasted sales toobtain forecasted COGS.
Task 1 -Question 6a)Moving AverageYearNet Interest Income3YR moving average200630812007331720083413200936253270.3333201039253451.6667201139523654.3333201238013834.0000201338333892.6667201440163862.0000201552543883.333320164367.6667Therefore, 2016 Forecast -4367.67b)Weighted Moving AverageAssume Weights-0.8, 0.10 & 0.10 with importance on recent dataYearNet Interest Income3YR Weighted moving average200630812007331720083413200936253370.2000201039253573.0000201139523843.8000201238013916.6000201338333828.5000201440163841.7000201552543976.200020164988.1000
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