Accounting and Forecasting - Essay Example

Sales Growth And Forecast Mark Cole CLN4U-01 Mr. Tomei Sales Forecast and Growth Year to Year percentage growth in net sales can be calculated by the formula of (S1-S0)/S0. Using this formula, g(growth) for year 2005 can be calculated by (11933-11062)/11062 which is 7.87%, the growth in year 2006 is (9181-11933)/11933 which gives negative growth of -23.06%. For the next year of 2007 growth is (6141-9181)/9181 that is equal to -33.11%, again high declining growth. For the last year 2008 there was positive growth of 35.

71% calculated by (8334-6141)/6141 = 35.71% As the target growth for the year 2009 was 10%, the target revenue for the year 2009 was (8334*1.1) that was $9167.4 Millions. On the basis of last year performance of the company in terms of sales growth the company may have achieved its target. In percentage of sales method to forecast income statement, all items pertaining to changes in sales are taken in terms of sales (percentage of sales/weight-age). In this method we assume that as sales would increase, Cost of sales and operating expenses would rise by the same.

Although, we assume that sales would grow by 20% and restructuring cost would be 2% of sales. We also assume that other income account would not change as other income and interest income does not respond to changes in revenue. On the basis of these assumptions we forecasted net income of $1687 Million in the year 2009 (See table 1).Reference Table 1: Forecasted Income Statement2008 (Mn $)Weight-ages2009(Mn $)(Figures Rounded off to nearest decimal)Forecasted 2009(Mn$)aSales 8334(8334*1.2)=1000110001bCost 5458.55458.5/8334= .

655(10001*.655)=65516551cGross Margin(a-b)28762876/8334= .34534503450dR&D525525/8334= .063 (10001*.063)=630630eSG&A691691/8334= .083(10001*.083)=829829fIn process R&D00gRestructuring cost0(10001*.02)=200200hTotal Operating Expenses(d+e+f+g)121616591659iOperating Income(c-h)166017911791jTotal interest and other income net194194194kIncome before tax (i+j)185419851985lProvision of Income tax(15%)278.1(1985*.15)= 298298mNet income (k-l)1575.916871687