Developing pro forma financial statements and cash flow forecasts depends heavil

Question

Developing pro forma financial statements and cash flow forecasts depends heavily upon sales forecasts. Imagine you are a financial analyst working for a major stockbroker, and you are trying to develop a one-year sales forecast for a major national department store. List five pieces of information you want to obtain to aid you in your forecast, and explain why they will aid you in your forecast.

Now that you have made your best prediction of next year's sales, you will want to estimate next year's cost of goods sold. Pick two pieces of information you definitely want to obtain in order to help you with this task, and explain why they will be helpful.

Explanation / Answer

Pro Forma :- For the sales forecast . The five pieces of information that I would want to obtain are :-

1. The economic conditions expected.

2. The sales in the past and the percentage of growth in sales every year.

3. Number of new stores at present , number of new stores management is planning to open in the upcoming year and number of old stores management is planning to disposing off.

4. Most important is to determine whether the changes in the past are a result of changes in the same store sales or due to the number of stores in operation which will have an effect on future sales projections.

5. Analyse the products that has more demand in the market so that the production of that product can be increased which will help in reducing cost. The more product produced the lesser the cost is.

After the Next year's sale is predicted we will want to estimate next year's cost of goods sold. The two pieces of information would be :-

The Selling expenses and the advertisement expenses will be determined in order to determine the cost of goods sold.

We need to determine the profit percentage required on the sales after estimating the cost of goods sold .

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