Finance Forecasting
Introduction
Financial forecasting involves an understanding of all the financial statements since one statement is not apt for analyzing the financial health of a company. Financial forecasting is important in enabling the business owners and management make smart managerial, investment, and financial decisions. It is also important in ascertaining whether the company is making profits or losses as well as determine whether the company is growing and as such would continue to grow. Forecasting is crucial for lending and investment purposes as the owners would be sure of the assets to buy or finance in addition to the collateral available to secure financing. This paper seeks to forecast and analyze the financial statements …show more content…
The company’s sales are expected to grow at a decreasing rate from 32.9 percent in 2016 to 3 percent in 2025 to reach $710,699,986. This shows a decreasing influence on the current liability and current asset account balances. The retained earnings are also expected to grow at the same pace since they are tied to sales through dividend payout ratio and profit margin. However, the industry and economy would have an effect on the forecasted figures due to restructuring in the industry may drastically shift the market share among the participants with economic business cycle also playing a crucial role in the forecast figures.
With regard to the sustainable growth rate, defined as the maximum rate at which AmerisourceBergen Corporation can grow without employing an additional debt. This is ascertained through ROE x (1 - dividend payout ratio), which would be 15 percent. This is the maximum rate at which the company would grow without having to take up additional debt. The realistic growth rate, on the other hand, would not take into effect the ROE since it fails to take debt into consideration. This would be calculated as …show more content…
In the income statement projections, other than the sales forecasts which are expected to fluctuate with time, other entries are expected to grow at a constant rate throughout the years. The net income at the end of the 10 years is expected to amount to $1,710,013, which shows that the company would have enough amount of money to grow its business with a substantial amount being left to the owners. The cash flow statement shows that the free cash flows to investors would be $1,199,349 while the increases in assets would amount to $40,312 and changes in liabilities, $57,042. This shows that the company would have enough money to cover for the day-to-day activities. The total assets are also expected to grow in the next ten years to $131,823,408 which also represents the total liabilities and equity. This shows that the company would be sustainable in those years and would thus run smoothly without
Introduction
Financial forecasting involves an understanding of all the financial statements since one statement is not apt for analyzing the financial health of a company. Financial forecasting is important in enabling the business owners and management make smart managerial, investment, and financial decisions. It is also important in ascertaining whether the company is making profits or losses as well as determine whether the company is growing and as such would continue to grow. Forecasting is crucial for lending and investment purposes as the owners would be sure of the assets to buy or finance in addition to the collateral available to secure financing. This paper seeks to forecast and analyze the financial statements …show more content…
The company’s sales are expected to grow at a decreasing rate from 32.9 percent in 2016 to 3 percent in 2025 to reach $710,699,986. This shows a decreasing influence on the current liability and current asset account balances. The retained earnings are also expected to grow at the same pace since they are tied to sales through dividend payout ratio and profit margin. However, the industry and economy would have an effect on the forecasted figures due to restructuring in the industry may drastically shift the market share among the participants with economic business cycle also playing a crucial role in the forecast figures.
With regard to the sustainable growth rate, defined as the maximum rate at which AmerisourceBergen Corporation can grow without employing an additional debt. This is ascertained through ROE x (1 - dividend payout ratio), which would be 15 percent. This is the maximum rate at which the company would grow without having to take up additional debt. The realistic growth rate, on the other hand, would not take into effect the ROE since it fails to take debt into consideration. This would be calculated as …show more content…
In the income statement projections, other than the sales forecasts which are expected to fluctuate with time, other entries are expected to grow at a constant rate throughout the years. The net income at the end of the 10 years is expected to amount to $1,710,013, which shows that the company would have enough amount of money to grow its business with a substantial amount being left to the owners. The cash flow statement shows that the free cash flows to investors would be $1,199,349 while the increases in assets would amount to $40,312 and changes in liabilities, $57,042. This shows that the company would have enough money to cover for the day-to-day activities. The total assets are also expected to grow in the next ten years to $131,823,408 which also represents the total liabilities and equity. This shows that the company would be sustainable in those years and would thus run smoothly without