Part A: Forecasting with the Percentage of Sales Method calculation:
Utilizing the fictitious company Tag-It Corporation, prepare next year’s forecast in a pro forma income statement. Tag-It’s CEO requested a report of a forecast with an increase in total revenue of 20% for next year. Prepare a forecast for next year utilizing the percentage of sales method, and complete the column in the forecast section on the Excel spreadsheet below. Here is the current income statement for Tag-It:
Part B: Analyze the growth rate in sales and the CEO’s prediction
- The total revenue numbers over the past 5 years for Tag-It Corporation were as follows (values in millions):
- 2018 72,710
- 2019 75,360
- 2020 78,112
- 2021 93,561
- Determine whether you think Tag-It can hit the target of a 20% increase in sales next year.
Part C: Develop the CEO’s report with your findings.
Prepare a 5-page report that includes a pro forma forecast using the template provided and an analysis of Tag-It’s ability to hit the 20% increase in sales in a separate word document.
Use the following template to complete the Unit 2 Individual Project (IP): Unit 2 Template
The use of 1 scholarly source (e.g., textbook, article from the CEC Library) is required.
Be sure to show your analysis in a table in a word document. Answer the questions above as part of your analysis. The assignment is 5 pages minimum. The analysis can be one page of the analysis.
|FINA310 IP TEMPLATE FOR STUDENTS (revised 2023)|
|Total Revenue||$ 106,005|
|Cost of Revenue||$ (74,963)|
|Gross Profit||$ 31,042|
|Operating Expenses||$ (22,096)|
|Operating Income||$ 8,946|
|Net Interest Income||$ (39)|
|Pre-Tax Income||$ 8,907|
|Provision for Income Tax (22%)||$ (1,961)|
|Net Income||$ 6,946|
Year over Year
|ANALYSIS OF GROWTH RATES|
|YEAR||Total Revenue||Growth Year over Year|
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Tutor’s Name and Title
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A company that looks into its cash flow makes it easy for the leaders to understand how it spends money and what it spends on. With a cash forecast, the company can control costs, operate under low expenses, avoid unnecessary losses, and maximize productivity.
A good management team would use a cash budget and cash forecast to plan for the future of the business. The most important thing that a company requires is to expand its territories and increases its production, encourage more people to invest in the industry, and improve the confidence of the business. In that case, the company must understand cash inflow and outflow (Plaskova et. 2020). With cash predictions, a business can understand what amount they need, understand the company’s strength, and how much it can generate in a specified time frame. If there is a surplus in the company, the management would be in a better position to make corrections by planning on dealing with the drawbacks and acting where there are deficits (Plaskova et. 2020). Moreover, the cash budget and forecast help the management understand how much the company owns in terms of assets and cash availability.
The company must have a definitive objective. With a good purpose, it would be easy for the management to understand why they need the budget in the first place. The administration also needs to collect all the data they need to make the cash budget, like sales forecasts, materials needed, and what the creditors require in terms of payments (Plaskova et. 2020). Additionally, the budget team can include other departments because the data supplied by different departments would be important in the budget process and forecasting. A good practice would also involve using an Excel sheet to create a simple budget plan that makes editing possible.
Business leaders using financial practices under the best practices will likely grow and deal with unforeseen throwbacks. It might be impossible to avoid negative cases, at least with a budget; the company increases its fighting and adapting chances. Good forecasting encourages the company’s success.
Plaskova, N. S., Prodanova, N. A., Ignatyeva, O. V., Nayanov, E. A., Goncharov, V. V., & Surpkelova, A. (2020). Controlling in cash flow management of the company.
EurAsian Journal of BioSciences,
Page 2: Introduction
Why is forecasting important?
What is the percentage of sales method?
Page 3: Insert Forecast from Income Statement template:
Page 4: Discuss whether the target can be reached based on previous years.
Nybro, P. (2022) Unit 2 chat.
AIUOnline.edu. Retrieved from
“Add the link to the Zoom”
Knight, D. (2022). Principles of Finance . OpenStax. https://aiu.vitalsource.com/books/9781951693541