Financial Analysis – Finance Component
In no more than 3 pages, develop the pro-formas using the % sales model, get a sales forecast out 3 years, and a forcasted share price. You can use the forecast data to derive the pro-formas. Focus on analyzing forecasted data with respect to the company’s future growth. The key here is making sure that you carefully consider your assumptions which allows you to perform that critical financial analysis with respect to the company’s financial growth. Emphasis needs to be on analyzing the pro-forma data which should enable anyone to justify your conclusions.
The PERCENT OF SALES MODEL should provide you the assumptions for deriving proformas for each of the three financial statements (balance sheet, income statement, and statement of cash flow), and will allow you to do your critical financial analysis of the firm.
i) The pro forma, must be forecasted out three years. 8
ii) Make sure you focus on your assumptions and EXPLICITLY show them since they will drive your forecasted data, which will allow you to perform the critical analysis where the company is going, based on your forecasted data INCLUDING THE FORECASTED SHARE PRICES.
iii) This should be the focus of your written analysis; stated differently, the focus needs to be on the future of your company and where it is going and why.
b) The emphasis should not be on the history of the company, other than what I have asked you to include, that is stated above.
c) Finally ,in your analysis you need to justify your conclusions. For example, is the company in a strong financial position based on its EXPECTED SHARE PRICES and MARKET CAPITALIZATION? Why or why not? What direction does the company need to go in either case? These are some of the questions that need answered.
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