Handout/notes on forecasting/Schan

Projecting the Condensed Statements

Part1 -- Income statement item
Sales
Cost of goods sold (COGS)
Sales, general and adminstrative (SGA)
Depreciation
Operating profit (OP)
Interest expense
Interest income
Non-operating income (expense)
Earnings before taxes (EBT)
Taxes
Net income before extraordinary items
After-tax extraordinary income (expense)
Net income
Preferred dividends
Common dividends
Additions to retained earnings

Projection Method
Assumed growth rate multiplied by previous year's sales
Percentage of sales
Percentage of sales
Percentage of net PPE
Calculated: Sales - COGS - SGA - Depreciation
(Rate on all ST debt)* (All ST debt at beginning of period) + (Rate on long-term
debt)*(Long-term debt at beginning of period)
(Rate on short-term investments)*(Short-term Investments at beginning of period)
Percentage of sales
Calculated: OP - Interest expense + Interest income + Non-operating income
(Tax rate)*(Earnings before taxes)
Calculated: EBT - Taxes
Percentage of sales
Calculated: NI before extraordinary items + After-tax extraordinary income
(Coupon rate on preferred stock)*(Preferred stock at beginning of period)
Growth rate multiplied by previous dividends
Calculated: Net income - Preferred dividends - Common dividends

Part2 - Balance sheet items (Assets)

Cash
Inventory
Accounts receivable
Other short-term operating assets
Short-term investments
Total current assets
Net PPE
Other long-term operating assets
Long-term investments
Total assests

Projection method
Percentage of sales
Percentage of sales
Percentage of sales
Percentage of sales
Plug: Chosen to make statement balance
Calculated: Cash + Inventory + AR + Other ST operating assets
Percentage of sales
Percentage of sales
Percentage of sales
Calculated: Total CA + Net PPE + Other LT operating assets + LT investments

Handout/notes on forecasting/Schan

Part 3 - Balance sheet items (Liabilities)

Accounts payable
Accruals
Other current Liabilities
All short-term debt
Total current liabilities
Long-term debt
Deferred taxes
Preferred stock
Other long-term liabilities
Total liabilities
Par plus paid-in-capital (PIC) less treasury (and
other adjustments)
Retained earnings
Total common equity
Total liabilities and equity

Projection method
Percentage of sales
Percentage of sales
Percentage of sales
Chosen to make statements balance
Calculated: AP + Accruals + Other CL + All ST debt percentage of value of operations
Percentage of operating assets
Percentage of net PPE
Percentage of operating assets
Percentage of sales
Calculated: Total CL + LT debt + Deferred taxes + Preferred stock + Other LT liabilities
Same as previous year
Previous year's retained earnings plus current addition to retained earnings from
income statement
Calculated: Par plus PIC + Retained earnings
Calculated: Total liabilities + Total common equity