Corporate Finance 4

Corporate Finance 4 - Forecast 2002 2002B Assets Cash 15.5...

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Body Shop Case Sunday, October 10, 2010 9:02 PM Prepare pr-formn/ projected financial statements Advisor to Anita Roddick (CEO) Mgmt is interested in forecasting in order to financially prepare for the future Investors want to see what their investments will be worth First, forecast income statement and net profits Next, forecast total assets on the balance sheet. TA=TL+OE B/S "PLUG" Total Assets Equity= Old equity + profit Total liabilities + OE Forecasting Historical method % of sales method Financial ratios Days receivable Days payable Days inventory Exhibit B --> Forecast line by ling 2001 Assumption 2002 Forecast 2002 Revised 2002 (B) Turnover 374.1 Inc 13% 422.7 422 Costs of Sales 149 39.8% of sales 168.4 GP 225.1 254.3 Op Exp Excel excep. costs 195.7 221 221 Exceptional costs 11.2 12.7 0 Restructuring Costs 1 1.1 0 Net int exp 4.4 5 4.4 Profit before tax 12.8 14.5 28.8 Tax exp 3.5 4 8.6 Profit (loss) after tax 9.3 10.5 20.2 Ordinary Div 10.9 12.3 10.9 Profit (loss) retained (1.6) (1.8) %of sales method
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Unformatted text preview: Forecast 2002 2002B Assets Cash 15.5 A/R 35.2 Inv 52 Other current assets 14.2 Net fixed assets 12.5 Other assets 2.6 Total assets 260 Liab & Equity A/P 12.1 T/P 8 Accruals 13 Overdrafts -> "PLUG" 18 Other C/L 19.1 Long term liab 69.5 61.2 Other liab .45 SH EQ 119.8 Total Liab & EQ 260 Total Assets =Total Liabilities + OE Dividend stay constant Restructuring is not recurring Dont expect exceptional costs to be recurring Net int exp is not a function of sales but rather of borrowing. Excel Options-> Formulas-> check enable iterative calculations Total Assets= Total Liabilities + OE Overdrafts- increasing sales causes growth in financing gap-> need to borrow funds Long term liability stays fairly constant See sensitivity analysis of overdrafts table Lessons: Because of financing gap, growth creates a need for financing Major methods of forecasting...
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Corporate Finance 4 - Forecast 2002 2002B Assets Cash 15.5...

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