Forecasting report | Accounting homework help

 You have been tasked with preparing and presenting a 5 year forecast to upper management. Select a publicly traded retailer who has at least the last three years of financial statements publicly available. Use those financial statements and the assumptions listed below. If further assumptions need to be made, make reasonable assumptions and list both the assumption and your logic within the report itself.


Your deliverable will be a Forecasting Report providing a 5 year forecast of the balance sheet and income statement to upper management. You have been reminded that, executives are extremely busy; therefore you will need to keep the executive summary which shall accompany your schedules to a maximum of two pages.

Income Statement Forecast Assumptions:


Assume that sales will grow 4.0% each year from Year +1 through Year +5.

Cost of Goods Sold

Assume that the cost of goods sold to sales percentage will be 75.0% for Year +1 to Year +5.

Selling and Administrative Expenses

Assume that the selling and administrative expenses will average 19.0% of sales for Year +1 to Year +5.

Interest Income

Assume the Company will earn interest income based on a 2.6% interest rate on average cash balances (that is, the sum of beginning and end- of-year cash balances divided by 2) for Year +1 through Year +5.

Interest Expense

If applicable, assume a 4.2% interest rate for all outstanding borrowing (short-term and long-term debt, including capital leases, and the current portion of long-term debt) for the Company for Year +1 through Year +5. Compute interest expense on the average amount of interest-bearing debt outstanding each year. (Note: Projecting the amount of interest expense must await projection of the interest-bearing debt accounts on the balance sheet.)

Income Tax Expense

Compute the average effective income tax rate for the past three years and assume your company’s effective income tax rate remains constant (@ the three year average) for Year +1 through Year +5. (Note: Projecting the amount of income tax expense must await computation of income before taxes.)

Balance Sheet Forecast Assumptions:


Use the cash as the “flexible” financial account to equate total assets with total liabilities plus shareholders’ equity. Projecting the amount of cash must await projections of all other balance sheet amounts.

Accounts Receivable

Assume that accounts receivable will continue to turnover at the same rate and increase at the growth rate in sales.


Assume that ending inventory will continue to be equal to 44 days of cost of goods sold, in Year +1 to Year +5.

Prepaid Expenses

Assume that prepayments will grow at the growth rate in sales.

Property, Plant, and Equipment

Compute the average property, plant and equipment additions over the previous three years.  Assume that property, plant, and equipment will continue to grow at the same rate (or dollar amount) each year from Year +1 through Year +5.

Accumulated Depreciation

Assume the Company recognizes a full year of depreciation on new property, plant, and equipment in the first year of service.

Accounts Payable

Assume that ending accounts payable will approximate 40 days of inventory purchases in Years +1 to +5. To compute the ending accounts payable balance using a 40-day turnover period, remember to add the change in inventory to the cost of goods sold to obtain the total amount of credit purchases of inventory during the year.

Accrued Liabilities

Assume that income taxes payable and deferred tax assets and liabilities grow at 3.0% per year in Year +1 through Year +5.

Short-Term Debt, Current Maturities of Long-Term Debt, Capital Leases, and Long- Term Debt

If your Company has debt then assume the short-term debt, current maturities of long-term debt, and long-term debt will grow at 3.0% per year in Year +1 through Year +5.

Common Stock and Additional Paid-in Capital

Assume that common stock and additional paid-in capital will continue to be 2.0% of total assets for Year +1 through Year +5.

Retained Earnings

Assume that Company will maintain a policy to pay dividends equivalent to 30% of net income attributable to Company shareholders in Year +1 through Year +5


Assume the Company uses cash as the flexible financial account to balance the balance sheet. The resulting cash balance each year should be the total amount of liabilities and shareholders’ equity minus the projected ending balances in all non-cash asset accounts.

Section A: Criteria

  • Design a spreadsheet and prepare a set of financial statement forecasts for your selected Company for Year +1 to Year +5 using the assumptions that were provided. Project the amounts in the order presented (unless indicated otherwise) beginning with the income statement and then the balance sheet. For this portion of the problem, assume that the Company will exercise its financial flexibility with the cash and cash equivalents account to balance the balance sheet.
  • Assume your Company’s dividend policy is to payout 30% of net income. Determine the total amount of dividends the Company could pay each year under this scenario.
  • Identify one potential benefit that increased dividends could create for the financial management of the Company. Include these benefits as part of the executive summary in Part 5.
  • Calculate and compare the return on common equity for the Company using the forecast amounts determined in Requirements 1 for Year +1 to Year +5.
  • Executive Summary of results (not to exceed 2 pages)
Premium Custom Essays
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.


Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.


Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.


Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.


Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.