Pro Forma Financial Model: Walgreens Boots Alliance Pharmacy Analysis

This report constructs a pro forma financial model for Walgreens Boots Alliance (WBA), detailing the essential inputs, assumptions, operational performance metrics, and financial processes required for its development. The model utilizes historical data to project future financial statements, emphasizing revenue growth, expense evaluation, and balance sheet analysis. Key components include revenue projections based on historical growth rates, cost and liability estimations, and the creation of pro forma income statements and balance sheets. The analysis incorporates sales forecasting methods, interest calculations, and considerations for corporate shares, dividends, and retained earnings. The report aims to provide a comprehensive financial overview, highlighting the importance of accurate financial planning and forecasting for investment assessment, and is available for download on Desklib, a platform offering a range of study tools and solved assignments.

Running head: PRO FORMA FINANCIAL MODEL
1
Pro Forma Financial Model for Walgreens Boots Alliance (WBA) Pharmacy
Name
Institution

PRO FORMA FINANCIAL MODEL 2
Introduction
A pro forma financial model involves financial statements that have assumptions as well
as projections. In this financial type model, the sole aim of an institution may be to determine the
effects of the three basic financial statements or options like the projected income statement and
balance sheet. This paper outlines the precepts of the pro forma financial model taking into
consideration the inputs and assumptions, the operational performances metrics, as well as the
financial processes that are required for the engagement of the model.
The projected future financial statements forming part of the pro forma financial model
comes from the idea of follow ups of financial statements that display the targeted results based
on the inputs as well as laid down policies for the financial position of Walgreens Boots
Alliance. It is also critical to note that the statements for the pro forma such as the balance sheet
as well as the income statement comes from the financial planning and are pillared on the
projected cash flow statements (Crawford, 2015). It is prudent to note that the three statements
are the basis of investment projection assessment. Value is determined through the forecasted
cash flow.
In preparing the financial pro forma model, there are a number of steps, input
assumptions, and operational performances. Some of them are discussed below.
Pro forma statement
The first step involves filling the income statement using the standard approach known as
the percent of sales forecasting method. This method also involves getting the sales or the sales
or revenue growth forecasting. Afterwards, the step follows the projection of the given financial

PRO FORMA FINANCIAL MODEL 3
variables that are related to each other in a stable manner to the sales using the sales that have
been forecasted as well as the estimated relations (Abor, 2017).
The creation of pro forma statement begins with the income statement of the current year,
considering the position of the organization based on the available current cash level as argued
by Hisrich & Ramadani, (2017). The first step, therefore, involves calculating the projections of
revenue for the organization. In this case, the revenue projection is for the Walgreens Boots
Alliance as an institution.
Revenue Growth model
Financial
year
2014 2015 2016 2017 2018 2019 2020
TR
(millions of
Dollars)
1,223 1,455 1,776 2,220 2,671 3,247 3,969
Y_o_Y model 12.7% 19% 21.1% 25% 20.3% 21.6% 22.2%
Assumption
The growth of sales that is reflected on the growth of revenue is based on the historical basis.
The major inputs of the financial statement forecast are al based on both the long term as well as
the short term debt rate of interest.
The sales growth rate as well as other payout ratio involves making use of the average value
between 7 years. Therefore, the sales growth is equated to the average sales growth rate in the
calculation.

PRO FORMA FINANCIAL MODEL 4
A lot of consideration has been put on the expenses for evaluation of the necessary costs.
The revenues
Sales
Expenses and Cost:
i. Cost of sales
ii. Selling, general and administrative expense
iii. Research and Development (R&D)
iv. Depreciation
Income (Operating)= Revenues - Cost and expenses
Interest
There are two aspects of interests involved in this case: the interest on expense and the interest
on income. This makes the net interest to be the combination of income and expense interest.
The valuation of income before deduction of taxes involves getting the value of
operating income and the net interest income taxes. In the same way, the net income involves
the total income valuation before taxes minus the income taxes.
Corporate Shares
The individual earning per common share is the net income of the organization within the
particular fiscal year divided by the common shares.
Dividends paid
Retained Earnings = Net income - Dividends paid

PRO FORMA FINANCIAL MODEL 5
The second step involves estimating the total liabilities and the total costs (Fraser &
Ormiston, 2016). In this case, the loans and the credit form the liabilities of the Walgreens Boots
Alliance. The costs on the other hand involve the leases, the employees pay, insurances, the
licenses, permits, materials, among others. This is as shown below:
The financial
year period
2014 2015 2016 2017 2018 2019 2020
TR
(millions of
Dollars)
1,223 1,455 1,776 2,220 2,671 3,247 3,969
Y_o_Y model 12.7% 19% 21.1% 25% 20.3% 21.6% 22.2%
Total Cost 1456 1500 1780 1900 2100 2150 2300
Total
Liabilities
1300 1650 1700 1900 2300 2370 2500
Y_o_Y model 10.4% 16% 20.1% 23% 20% 20.6% 22%
Income Statement
Net sales
$240,000.00
Walgreens Boots Alliance
decides that $20,000 is a
minimum
Cost of Goods Sold $156,000.00 65% of sales
Expenses
$36,000.00
15% of sales

PRO FORMA FINANCIAL MODEL 6
Interest Expense
$8,000.00
assumed to be estimated via
ratios.
Earnings Before Tax
$40,000.00
Taxes deducted $16,000.00
Net Income
$24,000.00
The paid Dividends $12,000.00
Retained Earnings additions
$12,000.00
Balanced Sheet (for the end of the stated period)
Cash $20,000.00
Accounts Receivable $65,000.00
Inventory $82,000.00
Net PP&E $150,000.00
Other Assets $25,000.00
Total Assets $342,000.00
Accounts Payable $18,000.00
Tax Accruals $9,000.00
Bank Loan $35,000.00
Equipment Loan $23,000.00
Miscellaneous Accruals $5,000.00
Long-Term Debt $45,000.00
Common Stock $95,000.00
Retained Earnings $112,000.00
Total Liabilities + Equity $342,000.00
References

PRO FORMA FINANCIAL MODEL 7
Abor, J. Y. (2017). Financial Planning and Forecasting. In Entrepreneurial Finance for
MSMEs (pp. 199-224). Palgrave Macmillan, Cham.
Crawford, T. (2015). Compensation Models, Patient Volume, and the Pro Forma. In The
Complete Business Guide for a Successful Medical Practice (pp. 47-57). Springer, Cham.
Fraser, L. M., & Ormiston, A. (2016). Understanding Financial Statements. Pearson Higher Ed.
Hisrich, R. D., & Ramadani, V. (2017). Entrepreneurial Business Planning. In Effective
Entrepreneurial Management(pp. 17-32). Springer, Cham.
Kemp, B. W., Kilgore, R. W., & Knox, H. L. (2014, March). Business Policy/Strategy Case
Extension Using Pro-Forma Planning: A Computer-Based Model. In Developments in
Business Simulation and Experiential Learning: Proceedings of the Annual ABSEL
conference (Vol. 21).
Solsma, L., & Wilder, W. M. (2015). Pro forma disclosure practices of firms applying
IFRS. International Journal of Accounting & Information Management, 23(4), 383-403.