Is your company likely to need additional external financing in the next few years? 1) Provide your...

Question

Is your company likely to need additional external financing in the next few years?

1) Provide your financial planning model for the next 3-5 years. Forecast income statements and cash flow statements (complete the summary tab)

2) Discuss all the assumptions

3) Examine the implications of the net change in cash as we did in the lectures and from there conclude whether your company is likely to need additional external financing in the next few years.

CoComplete the excel sheet for forecasting

q10-forecast-in0dswkc.xlsx q10-forecast-0rwjse0n-nr0rud4a.xlsx q-10-nunglidd-srtbspw4.docx

Prateek · Accepted Answer

Answer:
Yes, the company would need an external financing in the future because as per the forecasted cash flows, the net cash flow shows a negative balance in Year 2023, 2024 and 2025. The cash flow in 2023 is -3,864, in 2024 is -3.826 and in 2025 is -3,933. For the business to continue and earn profits, it needs the abovementioned amount per year to satisfy the business needs and earn an income of 2,774 in 2023, 2,830 in 2024 and 2,812 in 2025. 
The assumptions relating to growth rate seems positive, as a result of which the earnings in the future have shown an upward sloping linear trend.
The following table shows the  forecasted income statement of the company:
	
	2022 (actual)
	2023 (forecast)
	2024 (forecast)
	2025 (forecast)
	Revenue
	       1,37,888 
	            1,42,960 
	                 1,46,347 
	               1,48,056 
	Projected YoY growth rate of revenue 
	
	3.68%
	2.37%
	1.17%
	COGS
	       1,06,555 
	            1,10,474 
	                 1,13,092 
	               1,14,412 
	SG&A 
	           24,800 
	               25,712 
	                    26,321 
	                  26,945 
	Others
	                   -   
	 
	 
	                          -   
	EBIT
	             4,310 
	                 4,181 
	                      4,223 
	                    4,217 
	
	             3,709 
	                 3,829 
	 
	 
	Debt
	
	               11,312 
	                    10,881 
	                  10,452 
	Interest expense (negative) 
	(154.00)
	
	
	
	Other non-operating income
	 
	0
	0
	0
	Income before tax
	             2,802 
	                 2,774 
	                      2,830 
	                    2,812 
	Income Taxes
	 
	               527.06 
	 
	 
	Earnings
	 
	                 2,247 
	
	
Further, the year on year (YoY) growth in revenue during the forecasted period is 3.7%, 2.4% and 1.2% respectively. The external financing needed for the business could be reflected in the cash flow from investing activities of the business. The summary of CFI is shown in the following table:
	Capital Expenditure
	-2,809.00
	-2,967.00
	-3,128.00
	-2,865.00
	-2,614.

Is your company likely to need additional external financing in the next few years? 1) Provide your financial planning model for the next 3-5 years . Forecast income statements and cash flow...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment