1 - Control MenuFinancial Analysis & ForecastingPurpose of Spreadsheet:activeWksh2Wksh3Wksh4To illustrate concepts related to financial analysis and forecasting.Wksh5Wksh6The financial analysis uses a combination of ratios and industry averages toWksh7Wksh8evaluate the financial performance of the company. Trend line graphs are alsoWksh9Wksh10generated, comparing the company's performance with the industry averages.Wksh11Wksh12Finally, the historical information is used to prepare a set of pro formaWksh13Wksh14financial statements using both linear and non-linear functions.Wksh15Wksh16Required Inputs:You will need to collect financial statements for several reporting periods. If youwant to benchmark the performance against the industry, then you will also needto collect industry averages. The spreadsheet is setup to capture five reportingperiods (annual, quarterly, monthly). All input fields are highlighted in yellow.Note: A small red triangle in the upper right corner of a cell indicates that a comment hasbeen inserted. Point your mouse over the cell and the comment will appear.If a cell appears in red, this indicates a warning concerning a calculation.Worksheets:This spreadsheet consists of the following worksheets, divided into three sections:A) Input Worksheets for financial analysis using historical data:WorksheetTitlePurpose2General InputEnter general information here - used on several worksheets.3Balance SheetEnter comparative balances sheets for up to five periods.4Income StatementEnter comparative income statements for up to five periods.5Cash Flow StatementEnter comparative cash flow statements for up to five periods.Caution: If you enter less than five years of historical information, certain worksheetformulas may have to be revised.B) Output Worksheets for evaluating financial performance:6Key Financial DataCalculates key financial information for further analysis.7Ratio AnalysisCalculates a series of ratios for further analysis.8Benchmark AnalysisCompare ratio analysis to industry averages.9Horizontal AnalysisHorizontal analysis with corresponding trend lines.10Vertical AnalysisCommon size financials in percentages and graphs.C) Pro Forma / Forecasted Financials for Budgeting:11Pro Forma - SimpleSet of pro forma financials using simple assumptions12Pro Forma - RegressionSet of pro forma financials using linear trending13Pro Forma - ExponentialSet of pro forma financials using exponential smoothing14Scenario AnalysisExample of Scenario Analysis and Goal Seek Analysis15Budget AnalysisPreliminary budget analysis16Final BudgetsSet of budgets per various assumptions and forecasts.Note: Some additional worksheets (Answer Reports 1 & 2) may appear in the spreadsheetdue to the running of Solver.Macros:No macros have been used in this spreadsheet to give everyone some assurance that no virusesare contained in the spreadsheet. However, you are free to add your own macros to save time.Tools > Macro > Record New MacroExcel Functions:This spreadsheet uses certain financial functions (such as =TREND) which might not befound in your version of Microsoft Excel. To take full advantage of financial and statisticalfunctions, you should install the Add On package titled: Analysis TookPak. Go to the maintool bar, select Tools => Add-Ins => check the Analysis TookPak option, insert yourExcel CD and install the Analysis ToolPak. Also, you might want to install the SolverAdd-in since this is useful for solving special forecasting issues (such as finding theoptimal exponential factor).Compatibility:This spreadsheet was created with Microsoft Excel 2000. Older versions of Excel (such as 97)may not be compatible with this spreadsheet.

Comment boxes are used to describe accounts, ratios, and other information used in this spreadsheet! Whenever you see a small red triangle, point your mouse over this cell for additional information.Home - Active WorksheetBalance SheetIncome StatementCash Flow StatementKey FinancialsRatio AnalysisHorizontal AnalysisVertical AnalysisPro Forma Financials - Simple Projection ModelPro Forma Financials - Linear Trend ModelPro Forma Financials - Exponential SmoothingScenario AnalysisBudget AnalysisFinal BudgetsBenchmark AnalysisGeneral InputGeneral InputBalance SheetIncome StatementCash Flow StatementKey Financial DataRatio AnalysisBenchmark AnalysisHorizontal AnalysisVertical AnalysisPro Forma - SimplePro Forma - RegressionScenario AnalysisPro Forma - ExponentialWksh3Wksh4Wksh6Wksh5Wksh7Wksh9Wksh10Wksh11Wksh12Wksh16Wksh15Wksh14Wksh13Wksh8Wksh2Final BudgetsBudget Analysis

2 - General InputGeneral Input PanelHomeactiveThe following general information should be entered:Wksh3Wksh4Note: Sample data has been entered in the input cells to help you get started.Wksh5Wksh6Wksh7Wksh82-1Name of Company =>X Y Z Corporation USAWksh9Wksh10Wksh11Wksh122-2Reporting Periods =>Annual(Annual, Semi-annual, Quarterly or Monthly)Wksh13Wksh14Wksh15Wksh162-3Number of Days in Reporting Period are365What reporting periods will be entered?2-4Most Current Period2005(1999, July 1998, 6/30/97, etc.)2-5Previous Period2004(1999, July 1998, 6/30/97, etc.)2-62nd Previous Period2003(1999, July 1998, 6/30/97, etc.)2-73rd Previous Period2002(1999, July 1998, 6/30/97, etc.)2-84th Previous Period2001(1999, July 1998, 6/30/97, etc.)2-9Number of historical periods to be analyzed5How are the amounts expressed in the financial statements?(such as: in millions of dollars, thousands of Canadian dollars, etc.)2-10millions of dollars

Return to 1st WorksheetBalance SheetIncome StatementCash Flow StatementKey FinancialsRatio AnalysisBenchmark AnalysisHorizontal AnalysisVertical AnalysisPro Forma Financials - Simple Projection ModelPro Forma Financials - Linear Trend ModelPro Forma Financials - Exponential SmoothingScenario AnalysisBudget AnalysisFinal BudgetsGeneral InputHomeWksh3Wksh4Wksh6Wksh5Wksh7Wksh9Wksh10Wksh11Wksh12Wksh16Wksh15Wksh14Wksh13Wksh8

3 - Balance SheetHomeBalance Sheet for>>>X Y Z Corporation USABalancesBalancesBalancesBalancesBalancesAdditional Information3-30NonDepreciable Fixed Assets000003-31Deferred Taxes11210190981093-32Goodwill Write Off000003-33No of Common Shares o/s1,3201,2901,3021,3451,3223-34Par Value of Common Stock$10.00$10.00$10.00$10.00$10.003-35No of Preferred Shares o/s000003-36Par Value of Preferred Stock3-37Market Price of Common Stock$22.65$28.90$37.05$33.60$29.403-38Market Price of Preferred Stock$0.00$0.00$0.00$0.00$0.003-39Preferred Dividends in Arrears000003-40Liquidating value of Preferred Stk000003-41Book Value per Share$8.35$9.78$11.55$14.20$14.743-42Dividends per Common Share$1.01$1.49$1.89$1.75$1.763-43Dividend Payout Ratio45.47%38.61%39.44%29.76%30.24%3-44Cash Dividends to Preferred Stock000003-45Cash Dividends to Common Stock1,3301,9182,4612,3542,3293-46Total Dividends Paid1,3301,9182,4612,3542,329

Prepared by Matt H. Evans &D&RPage &PAll cash on hand and any deposits that can be converted into cash. Restricted Cash should be Other Current AssetsCan be held long-term, but is held for the purpose of earning a return on idle cash.Receivables from sales of products on account. Notes Receivalbe should be reported in Other Current Assets for accurate ratio analysis.Assets held for sale in ordinary business. All cost such as storage, handling, etc are part of inventory. There forms of inventory are Raw Materials, Work in Progress, and Finished Inventory.All other current assets not otherwise categorized, such as prepaid items.Noncurrent tangible assets used in business operations, such as equipment, vehicles, machinery, land, etc.Cumulative depreciation taken on fixed assets.All longterm investments at cost.Investments under the Equity Method in other companiesAll other non current assets, such as goodwill, trademarks, etc.Payables related to normal trade transactions with suppliers, vendors, etc. Does not include notes payable.Short term loans, notes payable, commercial paper, etc.Portion of longterm debt that will come due in the current period.All other current liabilities such as taxes payable, advances from customers, etc.Longterm bank loans, bonds, mortgages, capital lease obligations, etc.All other noncurrent liabilities, such as pensions, product warranties, and future obligations recognized.Total Equity from issuing preferred stock.Common stock equity at par value.Common Equity above par value.Transfer of earnings from various periods less dividends paid to shareholders.Stock buybacks and held in treasury at purchase cost. Reported as a negative amount to equity.Isolate any nondepreciable fixed assets for standardization, such as land or work in progress.Arises from timing differences between financials and tax return.Foreign currency translations accounted for under the Current Rate Method are reported in the Balance Sheet. Foreign currency translations accounted for under the Temporal Method are reported in the Income Statement.Make sure your Assets + Liabilities balance out with your total Equity. If not, the cell will appear in red with the out-of-balance amount.Average number of common shares outstanding. Rounded to fit with the Income Statement. If no major issues of stock and/or retirements took place during the period, then it's OK to use year-end outstanding shares.Total Equity (Net Assets) less any preferred stock dividends in arrears and the liquidation value of outstanding preferred stock.Preferred dividends in arrears based on par value of preferred x dividend rate x shares outstanding x number of years in arrears.Par value of preferred stock plus any premium that must be paid to retire preferred stock.Fair market value (price) of stock at end of period.All dividends declared and appropriated for the reporting period on common stock. Dividends actually paid per the Cash Flow Statement have been used to simplify the analysis.All dividends declared for the reporting period on preferred stock.Fair market value (price) of preferred stock at the end of the period.Prepared by Matt H. Evans &D&RPage &PHome>>>X Y Z Corporation USA>>X Y Z Corporation USA20012002200320042005Pro Forma Income Statement11-1Gross Revenues30,74234,43138,56243,19048,3739-1Growth Assumptions12.00%12.00%12.00%12.00%12.00%11-2Cost of Goods Sold(12,024)(13,467)(15,083)(16,893)(18,920)10-8Growth Assumptions39.11%39.11%39.11%39.11%39.11%11-3Operating Expenses(7,483)(8,381)(9,387)(10,513)(11,775)10-9Growth Assumptions24.34%24.34%24.34%24.34%24.34%4-24NonOperating Expenses(3,200)(3,200)(3,600)(3,600)(4,000)4-25ExtraOrdinary Items65065065070070011-4Net Income8,68510,03311,14312,88414,378Pro Forma Cash Flow StatementSources of Operating Cash Flow:11-5Net Income8,68510,03311,14312,88414,37811-6Depreciation and Amortization47049050052055011-7(Increase) Decrease Defer Taxes0000011-8(Gain) Loss on Sale of Assets15923611-9(Increase) Decrease Current Assets(789)(996)(1,116)(1,249)(1,399)11-10Increase (Decrease) Current Liab1,0731,2911,4461,6201,81411-11Operating Cash Flow9,45310,82711,97513,77715,348Investment Sources of Cash Flow:11-12Planned Sale of Assets1006020253511-13Planned Sale of Investments2,2002,1001,9001,8001,70011-14Other Investment Sources to be used0000011-15Total Investment Sources of Cash2,3002,1601,9201,8251,735Planned Investments:11-16Capital Expenditures(3,500)(3,000)(3,100)(2,700)(2,600)11-17Acquisitions in Other Co's(500)(750)(1,200)(650)(350)11-18Purchases of Investments(3,000)(3,500)(4,500)(6,000)(7,000)11-19Total Investment Applications of Cash(7,000)(7,250)(8,800)(9,350)(9,950)Cash Flow from Financing Activities:11-20Proceeds from Loans & Debt1,3001,00095075065011-21Proceeds from Minority Interest2060809010011-22Other Financing Activities0000011-23Total Financing Sources of Cash1,3201,0601,030840750Cash Flow Applied for Financing:11-24Payments on Loans & Debt(1,500)(1,000)(600)(500)(500)11-25Dividends Paid to Shareholders(2,500)(3,000)(4,000)(5,500)(7,000)11-26Purchase / Retire Stock(2,000)(2,000)(1,500)(1,000)(500)11-27Other Financing Activities0000011-28Total Financing Applications of Cash(6,000)(6,000)(6,100)(7,000)(8,000)11-29Total Change to Cash737972592(117)11-30Beginning Cash Balance8709431,7401,7651,85711-31Forecasted Ending Balance9431,7401,7651,8571,740Pro Forma Balance Sheet11-32Cash and Cash Equivalents9431,7401,7651,8571,74011-33Short Term Marketable Securities0000011-34Accounts Receivable3,0743,4433,8564,3194,83711-35Inventory2,4592,7543,0853,4553,87011-36Other Current Assets1,9982,2382,5072,8073,14411-37Total Current Assets8,47510,17511,21312,43813,59111-38Fixed Assets31,60034,60037,70040,40043,00011-39Accumulated Depreciation(3,480)(3,970)(4,470)(4,990)(5,540)11-40Net Fixed Assets28,12030,63033,23035,41037,46011-41Longterm Investments1,7053,1055,7059,90515,20511-42Investments in Other Companies9121,6622,8623,5123,86211-43Intangibles and Other Assets20024032040065011-44Total Non Current Assets30,93735,63742,11749,22757,17711-45Total Assets39,41245,81253,33061,66570,76811-46Accounts Payable5,2265,8536,5567,3428,22311-47Short Term Borrowings3,6894,1324,6275,1835,80511-48Short Term Portion of LT Debt303025201511-49Other Current Liabilities1,8452,0662,3142,5912,90211-50Total Current Liabilities10,79012,08113,52215,13616,94511-51Longterm Debt / Borrowings3,7503,7504,1004,3504,50011-52Other Longterm Liabilities70075080080080011-53Total Non Current Liabilities4,4504,5004,9005,1505,30011-54Total Liabilities15,24016,58118,42220,28622,24511-55Preferred Equity0000011-56Common Equity2,2002,2002,2002,2002,20011-57Additional Paid in Capital5,7005,7005,7005,7005,70011-58Retained Earnings26,19033,22240,36547,74855,12611-59Adj for Foreign Currency Transl(5,000)(4,000)(2,500)(1,500)(500)11-60Treasury Stock(3,550)(5,550)(7,050)(8,050)(8,550)11-61Total Equity25,54031,57238,71546,09853,97611-62External Financing Required (EFR)(1,368)(2,341)(3,807)(4,720)(5,453)Formula for Calculating EFR:Assets to Sales - Historical0.27Projected Increase to Sales3,294Liabilities to Sales - Historical0.35Profit Margin0.28Retention Ratio (1 - Dividend Payout)69.76%External Financing Required(6,278)

Start your pro forma forecast with Revenues as the "independent" driver for certain other variables in the forecast.Revenue growth assumptions are based on the most recent information. We did not want to use an overall average from the historical data since there is a clear trend downward.Cost of Goods Sold is calculated by taking the % relationship found in our vertical analysis. We applied an average % to Gross Revenues in this worksheet to arrive at projected Cost of Goods Sold.We simply took the average % change from our vertical analysis.Just as we did with Cost of Goods Sold, we took an average % to establish what % of total revenue are represented by Operating Expenses.We applied an average % to Gross Revenues above to calculate our projected Operating Expenses.We estimated NonOperating Expenses by simply looking at our past historical information. We factored into our forecast some step ups in expenses as we move forward. If there were no trends, we might want to simply take an average.Just like our Non Operating Expenses, we simply estimated by looking back at our historical data. If there was no trend, we could have taken an average.This is our forecasted Net Income for the forecast period based on simple assumptions that we derived from our historical information.The usual order of preparing a set of pro forma (forecasted) financials is to begin first with the Income Statement since you need to start with your Revenue forecast. Once you complete the Pro Forma Income Statement, move to the Cash Flows Statement and finish with the Balance Sheet.The out of balance amount represents either a deficit (requires internal and/or external financing) or a surplus - additional forecasted income closed to Retained Earnings.Balance SheetIncome StatementCash Flow StatementKey FinancialsRatio AnalysisBenchmark AnalysisHorizontal AnalysisVertical AnalysisPro Forma Financials - Simple Projection ModelPro Forma Financials - Linear Trend ModelPro Forma Financials - Exponential SmoothingScenario AnalysisBudget AnalysisFinal BudgetsReturn to 1st WorksheetGeneral InputDepreciation is projected based on planned future capital expenditures. Since no major expenditures of Fixed Assets are planned, we simply projected out incremental increases for future depreciation and amortization.No material changes are anticipated.Per review of past asset sales, most are sold for modest losses. The Financial Planning Department advised that a few sales would be made in the next two to three years. Estimated losses have been projected into our forecast.We estimated our change in current assets by looking back at our last current asset balance and comparing to a projected balance. The projected balance was calculated as a % of Revenues per review of our vertical analysis.Same as current assets, we went back to our vertical analysis and applied a % to Revenues to project a current liability balance. We compared this to the previous balance to get a change in current liabilities.Per discussions with the Financial Planning Dept and the CFO, we estimated future expected sales of investments. We also reviewed the past historical trend.Per discussion with Financial Planning and CFO, they did indicate that assets would be sold off since there is a recurring review of underperforming assets with subsequent sale.The CFO and Financial Planning indicated no other major investment sources would be used for generating cash.A Capital Expenditure Budget was compiled and showed a slowly declining investment pattern in Fixed Assets. The Company has plans to move more into investments in other companies and assets that provide higher returns.There was strong indication from management to start investing much more in other companies. Most of the current business lines in place are very mature with declining growth rates. A shift in strategy towards acquiring interest in high growth emerging companies that have similar product / service lines has been approved by Senior Management.The company will continue to purchase investments which will get converted over into possible acquisitions for improving growth rates.The company will rely less on debt financing for cash since it has high levels of unused internal financing that need to be applied and / or distributed as dividends / stock buybacks.Proceeds from interest in other companies is expected to grow as the company begins to invest more heavily in other companies.Payments on debt are expected to decline as more internal sources of financing are applied.Continued strong dividend payments will be made in order to provide a strong yield for investors.Due to declining stock prices, the company will start a stock buyback program. The program will slowly decline over time as the stock price recovers.Balance is carried forward per the Cash Flow Statement.Since receivable balances usually move with revenues, we projected this balance as a % of projected revenues. Ref 11-1 * %'s as indicated in our Vertical Analysis. For Accts Receivable we used a flat 10%As calculated aboveWe did forecast any material balances related to Marketable Securities.Sum of all current assets. We also compared this total to % of Revenues in arriving at Current Assets and did not see any material differences.Same concept as receivables, we applied a % of Revenues in arriving at inventory. The % was derived by looking at our vertical analysis. For inventory, we used a flat 8% x Total Revenues per Ref 11-1Once again, we simply applied a % (6.5% in this case) to Total Revenues in arriving at Other Current Assets. The 6.5% was derived by looking at our vertical analysis.Projected based on % of Revenues per our Vertical Analysis. Same as what we did with most of our current assets.Same concept as for accounts payable and current assets, we took a percent per our Vertical Analysis and applied it to Total Revenues per this worksheet.Same concept as Accounts Payable, estimated based on % of Revenues per Vertical Analysis.This is a rough estimate based on the prior balance, brought forward by simply looking at what we expect to pay for the buyback of stock within our Cash Flow Statement per above.This is an estimate based on simply bringing the balance forward by adding Net Income and subtracting Dividends per above.No changes are expected with common equity. We simply used a flat amount per prior financials.This is an estimated flat amount per past financials. It could change once we start our stock buyback program.Estimated based on past financials and what we expect to happen with longterm debt borrowings.We simply brought forward our longterm liability balance by adding proceeds per the Cash Flow Statement and deducting payments on debt per the Cash Flow Statement.Estimated based on past historical trends and no anticipated changes in the use of Other Longterm Liab (such as leasing arrangements).We simply brought the account balance forward, adjusted it per our projections in the Cash Flow Statement.We simply brought the account balance forward, adjusted it per our projections in the Cash Flow Statement.We simply brought the account balance forward and adjusted for changes per the Cash Flow Statement.We simply brought the account balance forward and adjusted for changes per the Cash Flow Statement.Projected out based on increasing acquisitions in other companies.Formula for calculating External Financing Required:

((Assets that change with Sales / Sales) x Projected Sales Increase) - ((Liabilities that change with Sales / Sales) x Projected Sales Increase) - (Profit Margin x Projected Sales x Retention Ratio)We selected only current assets, but Fixed Assets may also change given movements with Sales.We selected only current liabilities, but longterm liabilities may move given changes with sales.Wksh3Wksh4Wksh6Wksh5Wksh7Wksh9Wksh10Wksh8Wksh16Wksh15Wksh14Wksh13Wksh12HomeWksh2

HomeWksh2ProForma Financials (Linear Trend Model)Wksh3Wksh4X Y Z Corporation USAWksh5Wksh6Wksh7Wksh8A set of pro forma (forecasted) financial statements are generated using the results ofWksh9Wksh10the historical analysis in the previous worksheets. A statistical method known asWksh11activelinear regression is used to predict future values. If you have important assumptionsWksh13Wksh14that are important to the forecast, then these assumptions should over-ride theWksh15Wksh16linear calculations since we want our forecast to be as accurate as possible.Key Point => If your historical information has gradual trends, then linear regressionis an appropriate model for forecasting. However, if your historical information hasdistinct steps up or down, then you should consider using a smoothing model .Before we adopt a regression model, it's a good idea to generate a scatter graph of the actual dataand observe if there is a clear trend for fitting a straight regression line into the data:The calculation of linear values is determined by defining the slope of the line and the y intercept:OrderTotal RevLinearSlopeInterceptFormula for Linear Trendline:Yearvariable xactual yValue ym factorb factor2001112,07612,6833876.208806.60y = ( m * x ) + b2002216,71916,5592003321,19620,435m: slope of line2004424,73724,311x: independent variable2005527,44828,188b: y intercept2001632,0642002735,9402003839,8162004943,69220051047,569The degree of linear fit with the actual data can be expressed as R Square0.9888AnnualAnnualAnnualAnnualAnnualPeriodPeriodPeriodPeriodPeriod20012002200320042005Pro Forma Income Statement12-1Gross Revenues12,68316,55920,43524,31128,18812-2Cost of Goods Sold(5,407)(6,647)(7,887)(9,127)(10,367)12-3Operating Expenses(3,035)(3,978)(4,921)(5,864)(6,807)12-4Operating Income4,2415,9347,6279,32011,01412-5Non Operating Expenses(853)(1,392)(1,931)(2,470)(3,009)4-25Extra Ordinary Items271271271271271Net Income3,6594,8135,9677,1218,275Pro Forma Cash Flow StatementSources of Operating Cash Flow:Net Income3,6594,8135,9677,1218,275Depreciation and Amortization470490500520550(Increase) Decrease Defer Taxes00000(Gain) Loss on Sale of Assets159236(Increase) Decrease Current Assets4,087(1,047)(1,047)(1,047)(1,047)Increase (Decrease) Current Liab(5,248)1,3571,3571,3571,357Operating Cash Flow2,9835,6226,7797,9549,141Investment Sources of Cash Flow:Planned Sale of Assets10060202535Planned Sale of Investments2,2002,1001,9001,8001,700Other Investment Sources to be used00000Total Investment Sources of Cash2,3002,1601,9201,8251,735Planned Investments:Capital Expenditures(3,500)(3,000)(3,100)(2,700)(2,600)Acquisitions(500)(750)(1,200)(650)(350)Purchases of Investments(3,000)(3,500)(4,500)(6,000)(7,000)Total Investment Applications of Cash(7,000)(7,250)(8,800)(9,350)(9,950)Cash Flow from Financing Activities:Proceeds from Loans & Debt1,3001,000950750650Proceeds from Minority Interest20608090100Other Financing Activities00000Total Financing Sources of Cash1,3201,0601,030840750Cash Flow Applied for Financing:Payments on Loans & Debt(1,500)(1,000)(600)(500)(500)Dividends Paid to Shareholders(2,500)(3,000)(4,000)(5,500)(7,000)Purchase / Retire Stock(2,000)(2,000)(1,500)(1,000)(500)Other Financing Activities00000Total Financing Applications of Cash(6,000)(6,000)(6,100)(7,000)(8,000)Total Change to Cash(6,397)(4,408)(5,171)(5,731)(6,324)Beginning Cash Balance870(5,527)(9,935)(15,106)(20,836)Forecasted Ending Balance(5,527)(9,935)(15,106)(20,836)(27,160)Pro Forma Balance SheetCash and Cash Equivalents(5,527)(9,935)(15,106)(20,836)(27,160)Short Term Marketable Securities00000Accounts Receivable1,2681,6562,0442,4312,819Inventory1,0151,3251,6351,9452,255Other Current Assets8241,0761,3281,5801,832Total Current Assets(2,420)(5,878)(10,099)(14,880)(20,254)Fixed Assets31,60034,60037,70040,40043,000Accumulated Depreciation(3,480)(3,970)(4,470)(4,990)(5,540)Net Fixed Assets28,12030,63033,23035,41037,460Longterm Investments1,7053,1055,7059,90515,205Investments in Other Companies9121,6622,8623,5123,862Intangibles and Other Assets200240320400650Total Non Current Assets30,93735,63742,11749,22757,177Total Assets28,51729,75932,01834,34736,923Accounts Payable2,1562,8153,4744,1334,792Short Term Borrowings1,5221,9872,4522,9173,383Short Term Portion of LT Debt3030252015Other Current Liabilities7619941,2261,4591,691Total Current Liabilities4,4695,8267,1778,5299,881Longterm Debt / Borrowings3,7503,7504,1004,3504,500Other Longterm Liabilities700750800800800Total Non Current Liabilities4,4504,5004,9005,1505,300Total Liabilities8,91910,32612,07713,67915,181Preferred Equity00000Common Equity2,2002,2002,2002,2002,200Additional Paid in Capital5,7005,7005,7005,7005,700Retained Earnings21,16422,97724,94426,56627,841Adj for Foreign Currency Transl(5,000)(4,000)(2,500)(1,500)(500)Treasury Stock(3,550)(5,550)(7,050)(8,050)(8,550)Total Equity20,51421,32723,29424,91626,691External Financing Required (EFR)(916)(1,894)(3,354)(4,248)(4,949)

This is our forecasted Net Income based on linear regression analysis.Once again, we simply took an average from our historical data to project out Extra Ordinary Items. If there is a trend, then we may need to consider using regression analysis.Gross Revenues have been projected out along a straight linear line using regression analysis. The historical information is the source of the analysis using the TREND function in Microsoft Excel.We also applied linear regression to forecast our Cost of Goods Sold since it may move slightly differently than Revenues.We also applied regression analysis to forecast our Operating Expenses.Sum of Gross Revenues, Cost of Goods Sold, and Operating Expenses.Since there appears to be a gradual trend in our Non Operating Expenses, we also applied linear regression to forecast this item.Balance SheetIncome StatementCash Flow StatementKey FinancialsRatio AnalysisBenchmark AnalysisHorizontal AnalysisVertical AnalysisPro Forma Financials - Simple Projection ModelPro Forma Financials - Linear Trend ModelPro Forma Financials - Exponential SmoothingScenario AnalysisBudget AnalysisFinal BudgetsReturn to 1st WorksheetGeneral InputThe out of balance amount represents either a deficit (requires internal and/or external financing) or a surplus - additional forecasted income closed to Retained Earnings.

1207616719211962473727448

Total RevenuesPeriodsTotal Revenues

HomeWksh2ProForma Financials (Exponential Smoothing / Weighted Moving Average)Wksh3Wksh4X Y Z Corporation USAWksh5Wksh6Wksh7Wksh8A set of pro forma (forecasted) financial statements are generated using the results ofWksh9Wksh10the historical analysis in the previous worksheets. A statistical method known asWksh11Wksh12exponential smoothing is used to plot a trend over historical data. Additionally, weactiveWksh14can use a weighted moving average to forecast future periods.Wksh15Wksh16Key Point => If you have a general upward historical trend, weighted average will tendto underestimate forecasted values and vice versa (downward trend = overestimate).Exponential Smoothing and Weighted Moving Averages for Total Revenues:Years =>1996199719981999200020012002200320042005Total Revenues - Historical12,07616,71921,19624,73727,448Total Revenues - Exponential12,07612,07616,71921,19624,737Total Revenues - Wt Moving Avg11,10515,23018,89021,60522,96526,07026,41326,31626,35526,340Smoothing Factor must be between 0 and 101Total weights should add up to =>100.00%Set Smoothing Factor1.00Assign weights to appropriate periods0.00%1.50%4.50%34.50%59.50%100.00%Find the Optimal Smoothing Factor:TotalExponentRevenuesAmountsDifferenceSquare12,07612,0760016,71912,0764,64321,557,44921,19616,7194,47720,043,52924,73721,1963,54112,538,68127,44824,7372,7117,349,521Mean Squared Error12,297,836Find the Optimal Moving Weights:TotalWeightedRevenuesAmountsDifferenceSquare12,07611,105971942,84116,71915,2301,4892,217,12121,19618,8902,3065,317,63624,73721,6053,1329,809,42427,44822,9654,48320,100,607Mean Squared Error7,677,526AnnualAnnualAnnualAnnualAnnualPeriodPeriodPeriodPeriodPeriod20012002200320042005Pro Forma Income StatementGross Revenues26,07026,41326,31626,35526,340Cost of Goods Sold(10,197)(10,207)(9,860)(9,694)(9,740)Operating Expenses(6,346)(6,226)(6,229)(6,464)(6,859)Operating Income9,5279,97910,22710,1979,740NonOperating Expenses(3,200)(3,200)(3,600)(3,600)(4,000)ExtraOrdinary Items650650650700700Net Income6,9777,4297,2777,2976,440Pro Forma Cash Flow StatementSources of Operating Cash Flow:Net Income6,9777,4297,2777,2976,440Depreciation and Amortization470490500520550(Increase) Decrease Defer Taxes00000(Gain) Loss on Sale of Assets159236(Increase) Decrease Current Assets472(92)26(11)4Increase (Decrease) Current Liab(562)120(34)14(5)Operating Cash Flow7,3727,9567,7717,8246,995Investment Sources of Cash Flow:Planned Sale of Assets10060202535Planned Sale of Investments2,2002,1001,9001,8001,700Other Investment Sources to be used00000Total Investment Sources of Cash2,3002,1601,9201,8251,735Planned Investments:Capital Expenditures(3,500)(3,000)(3,100)(3,900)(4,600)Acquisitions(500)(750)(500)00Purchases of Investments(2,000)(3,000)(3,000)(1,000)(1,000)Total Investment Applications of Cash(6,000)(6,750)(6,600)(4,900)(5,600)Cash Flow from Financing Activities:Proceeds from Loans & Debt1,3002,0003,0004,5007,000Proceeds from Minority Interest20608090100Other Financing Activities00000Total Financing Sources of Cash1,3202,0603,0804,5907,100Cash Flow Applied for Financing:Payments on Loans & Debt(1,500)(1,800)(2,500)(4,000)(6,000)Dividends Paid to Shareholders(2,500)(3,000)(4,000)(4,000)(3,000)Purchase / Retire Stock00000Other Financing Activities00000Total Financing Applications of Cash(4,000)(4,800)(6,500)(8,000)(9,000)Total Change to Cash992626(329)1,3391,230Beginning Cash Balance8701,8622,4882,1593,497Forecasted Ending Balance1,8622,4882,1593,4974,728Pro Forma Balance SheetCash and Cash Equivalents1,8622,4882,1593,4974,728Short Term Marketable Securities00000Accounts Receivable2,6072,6412,6322,6362,634Inventory2,0862,1132,1052,1082,107Other Current Assets1,6951,7171,7111,7131,712Total Current Assets8,2498,9598,6069,95511,181Fixed Assets31,60034,60037,70041,60046,200Accumulated Depreciation(3,480)(3,970)(4,470)(4,990)(5,540)Net Fixed Assets28,12030,63033,23036,61040,660Longterm Investments7051,6052,7051,9051,205Investments in Other Companies9121,6622,1622,1622,162Intangibles and Other Assets75100150150100Total Non Current Assets29,81233,99738,24740,82744,127Total Assets38,06142,95646,85350,78255,308Accounts Payable4,4324,4904,4744,4804,478Short Term Borrowings3,1283,1703,1583,1633,161Short Term Portion of LT Debt3030252015Other Current Liabilities1,5641,5851,5791,5811,580Total Current Liabilities9,1559,2749,2369,2449,234Longterm Debt / Borrowings3,7503,9504,4504,9505,950Other Longterm Liabilities700750800800800Total Non Current Liabilities4,4504,7005,2505,7506,750Total Liabilities13,60513,97414,48614,99415,984Preferred Equity00000Common Equity2,2002,2002,2002,2002,200Additional Paid in Capital5,7005,7005,7005,7005,700Retained Earnings17,50514,50510,5056,5053,505Adj for Foreign Currency Transl(5,000)(3,500)(1,000)00Treasury Stock(1,550)(1,550)(1,550)(1,550)(1,550)Total Equity18,85517,35515,85512,8559,855External Financing Required (EFR)5,60211,62716,51322,93229,469

Carried forward per above.Carried forward same estimates as used in the Simple Model - Worksheet 11.Carried forward same estimates as used in the Simple Model - Worksheet 11.Carried forward same estimates as used in the Simple Model - Worksheet 11.We applied the same concept we used in the Simple Model, apply a % derived from our vertical analysis to Total Revenues.We applied the same concept we used in the Simple Model, apply a % derived from our vertical analysis to Total Revenues.Carried over same estimates from the Simple Model - Worksheet 11.Carried over same estimates from the Simple Model - Worksheet 11.Carried over same estimates from the Simple Model - Worksheet 11.Carried over same estimates from the Simple Model - Worksheet 11.Carried over same estimates from the Simple Model - Worksheet 11.Carried over same estimates from the Simple Model - Worksheet 11.Carried over same estimates from the Simple Model - Worksheet 11.Carried over same estimates from the Simple Model - Worksheet 11.Carried over same estimates from the Simple Model - Worksheet 11.Carried forward from above.No material balance was anticipated.We applied a % of Total Revenues. The % was based on the Vertical Analysis - Worksheet 10.We applied a % of Total Revenues. The % was based on the Vertical Analysis - Worksheet 10.We applied a % of Total Revenues. The % was based on the Vertical Analysis - Worksheet 10.We simply brought the account balance forward, adjusted it per our projections in the Cash Flow Statement.We simply brought the account balance forward, adjusted it per our projections in the Cash Flow Statement.We simply brought the account balance forward and adjusted for changes per the Cash Flow Statement.We simply brought the account balance forward and adjusted for changes per the Cash Flow Statement.Projected out based on increasing acquisitions in other companies.We simply posted the same projection from our Simple Model in Worksheet 11.Projected based on % of Revenues per our Vertical Analysis. Same as what we did with most of our current assets.Same concept as for accounts payable and current assets, we took a percent per our Vertical Analysis and applied it to Total Revenues per this worksheet.Same concept as Accounts Payable, estimated based on % of Revenues per Vertical Analysis.We posted the same estimate used in the Simple Model on Worksheet 11.We posted the same estimate used in the Simple Model on Worksheet 11.Posted the same estimate used in the Simple Model on Worksheet 11.Posted the same estimate used in the Simple Model on Worksheet 11.Posted the same estimate used in the Simple Model on Worksheet 11.Posted the same estimate used in the Simple Model on Worksheet 11.You can also use the =Forecast or =Trend function in Excel to calculate linear values. We used the =Trend function for our forecast which follows belowWe start by entering our historical data into the worksheet so we can reference this data for exponential smoothing.Exponential smoothing usually starts with the historical value as a start point and moves forward using a "dampening" factor. The dampening factor is a weight between 0 and 1. The higher the dampening factor, the more responsive the analysis is to changes in the historical data.Balance SheetIncome StatementCash Flow StatementKey FinancialsRatio AnalysisBenchmark AnalysisHorizontal AnalysisVertical AnalysisPro Forma Financials - Simple Projection ModelPro Forma Financials - Linear Trend ModelPro Forma Financials - Exponential SmoothingScenario AnalysisBudget AnalysisFinal BudgetsReturn to 1st WorksheetGeneral InputSince we do not have data prior to our initial period, we will start exponential smoothing with the same value as our historical data.We can also use a simple moving average by assigning weights to prior periods. In order to calculate a moving average for the historical period, we had to go back to previous years and manually calculate the moving average.Weights or %'s are assigned to breakout how you want to calculate the moving average.

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Total Revenues - HistoricalTotal Revenues - ExponentialTotal Revenues - Wt Moving AvgPeriodsTotal RevenuesExponential Comparison

HomeWksh2Scenario Analysis forWksh3Wksh4X Y Z Corporation USAWksh5Wksh6Wksh7Wksh8We can copy our forecast into a new worksheet and do scenario analysis and goal-seek analysis.Wksh9Wksh10Although Microsoft Excel includes Scenario Manager, it can be easier and quicker to simply do ourWksh11Wksh12scenario analysis manually. We can use Goal Seek to find a value for a cell given a correspondingWksh13activeformula in another cell.Wksh15Wksh16AnnualAnnualAnnualAnnualAnnualPeriodPeriodPeriodPeriodPeriod20012002200320042005Pro Forma Income Statement (Simple Projection Method)Scenario => Non Operating Expenses will decline by $ 100,000 in year 2003 and again in year 2005:Gross Revenues30,74234,43138,56243,19048,373Cost of Goods Sold(12,024)(13,467)(15,083)(16,893)(18,920)Operating Expenses(7,483)(8,381)(9,387)(10,513)(11,775)NonOperating Expenses(3,200)(3,200)(3,100)(3,100)(3,000)ExtraOrdinary Items650650650700700Net Income8,68510,03311,64313,38415,378Instead of copying our forecast into this worksheet, we can simply do scenario analysis directly inthe forecast itself.Pro Forma Income Statement (Linear Trend Method)Goal Seek => What total revenues are required if Net Income must be $ 13.5 million in Year 2004?Gross Revenues32,06435,94039,81644,30147,569Cost of Goods Sold(11,607)(12,847)(14,087)(15,327)(16,567)Operating Expenses(7,750)(8,693)(9,636)(10,579)(11,522)Non Operating Expenses(3,549)(4,088)(4,627)(5,166)(5,705)Extra Ordinary Items271271271271271Net Income (formula cells)9,43010,58411,73813,50014,046Do not change formula cells (goals) to valueswhen using Goal Seek (Tools > Goal Seek)This is the target cell that Goal Seek is seekingto change per the value 13,500 in cell G34

We can find the optimal smoothing factor for exponential smoothing by minimizing the Mean Squared Error. Minimizing the Mean Squared Error is a common practice used for optimalization of financial models. Additionally, we can use the Solver application in Excel to solve for the optimal value we are looking for.

Go the toolbar and select: Tools => SolverTarget cell is the Mean Squared Error (cell G30)Equal is set to min since we want to minimize the target cellVariable cell is factor we want to optimize (in this case it is the smoothing factor in cell D19)Two Constraints are added:D19 = 0 (cell D18)

Hit Solve and a report worksheet is inserted into the spreadsheet.See Answer Report 1Gross Revenues have been projected out per our analysis above. No adjustments have been made for growth. Therefore, this forecast represents a "worse case" scenario.We simply applied the % of Cost of Goods Sold reflected in our vertical analysis worksheet. We took the average of the vertical %'s.We also used the vertical analysis % to forecast our Operating Expenses.Sum of Gross Revenues, Cost of Goods Sold, and Operating Expenses.This is our forecasted Net Income based on linear regression analysis.The out of balance amount represents either a deficit (requires internal and/or external financing) or a surplus - additional forecasted income closed to Retained Earnings.We estimated NonOperating Expenses by simply looking at our past historical information. We factored into our forecast some step ups in expenses as we move forward. If there were no trends, we might want to simply take an average.Just like our Non Operating Expenses, we simply estimated by looking back at our historical data. If there was no trend, we could have taken an average.We originally assigned three weights for the most three recent years to get a moving average. However, once we used Solver, we found that the optimal moving weights were for four periods and thus, we needed to change our formula.

We applied Solver (Tools > Solver) to minimize the Mean Squared Error as follows:

Set Cell is the Mean Squared Error in Cell G41.We want to minimize the Set Target Cell.The (changing cells) variables are the weights which appear in the cell range D20:H20We added three constraints:D20:H20 = D18 (all of our weights must be at least equal to 0)I20 = E18 (the sum of all weights must add up to 1)

Once we hit solve, Solver replaces the weight percents with the set of weights that minimizes the Mean Squared Error. Results appeared in Answer Report 2.Carried forward per above.Depreciation is projected based on planned future capital expenditures. Since no major expenditures of Fixed Assets are planned, we simply projected out incremental increases for future depreciation and amortization.No material changes are expected.Per review of past asset sales, most are sold for modest losses. The Financial Planning Department advised that a few sales would be made in the next two to three years. Estimated losses have been projected into our forecast.We estimated our change in current assets by looking back at our last current asset balance and comparing to a projected balance. The projected balance was calculated as a % of Revenues per review of our vertical analysis.Same as current assets, we went back to our vertical analysis and applied a % to Revenues to project a current liability balance. We compared this to the previous balance to get a change in current liabilities.Per discussion with Financial Planning and CFO, they did indicate that assets would be sold off since there is a recurring review of underperforming assets with subsequent sale.Per discussions with the Financial Planning Dept and the CFO, we estimated future expected sales of investments. We also reviewed the past historical trend.The CFO and Financial Planning indicated no other major investment sources would be used for generating cash.A Capital Expenditure Budget was compiled and showed a slowly declining investment pattern in Fixed Assets. The Company has plans to move more into investments in other companies and assets that provide higher returns. In this forecast, we projected sluggish growth related to Net Assets because of the poor sales forecast.There was strong indication from management to start investing much more in other companies. Most of the current business lines in place are very mature with declining growth rates. A shift in strategy towards acquiring interest in high growth emerging companies that have similar product / service lines has been approved by Senior Management. However, under this forecast, we only planned a modest investment strategy over the next three years because this forecast has much slower growth.A more conservative approach to purchasing investments is adopted under this forecast compared to the other forecast since this forecast has much lower revenue growth.Payments on debt are expected to decline as more internal sources of financing are applied.Dividends may have to get decline in later years unless higher growth rates can be obtained.Under the other forecast, we started a stock buyback program. However, under this forecast we did not initiate a stock buyback program due to much lower revenue growth.Balance is carried forward per the Cash Flow Statement.We did forecast any material balances related to Marketable Securities.Since receivable balances usually move with revenues, we projected this balance as a % of projected revenues. Ref 11-1 * %'s as indicated in our Vertical Analysis. For Accts Receivable we used a flat 10%Same concept as receivables, we applied a % of Revenues in arriving at inventory. The % was derived by looking at our vertical analysis. For inventory, we used a flat 8% x Total Revenues per Ref 11-1Once again, we simply applied a % (6.5% in this case) to Total Revenues in arriving at Other Current Assets. The 6.5% was derived by looking at our vertical analysis.We simply brought the account balance forward, adjusted it per our projections in the Cash Flow Statement.We simply brought the account balance forward, adjusted it per our projections in the Cash Flow Statement.We simply brought the account balance forward and adjusted for changes per the Cash Flow Statement.We simply brought the account balance forward and adjusted for changes per the Cash Flow Statement.Projected out based on increasing acquisitions in other companies.Projected based on % of Revenues per our Vertical Analysis. Same as what we did with most of our current assets.Estimated based on past financials and what we expect to happen with longterm debt borrowings.Same concept as for accounts payable and current assets, we took a percent per our Vertical Analysis and applied it to Total Revenues per this worksheet.Same concept as Accounts Payable, estimated based on % of Revenues per Vertical Analysis.Estimated based on past historical trends and no anticipated changes in the use of Other Longterm Liab (such as leasing arrangements).We simply carried forward the balance from the historical Balance Sheet.We simply brought the balance forward and adjusted for cash flows related to debt. In this forecast, we projected higher levels of debt financing to support sales.Generally, the smoothing factor is less than 1.0, such as .70 and a dampening factor determines the responsiveness of the exponential curve to the data. The sum of the smoothing factor + the dampening factor = 1.0Goal Seek finds the value for one cell in a spreadsheet given a "goal" in another cell that contains a formula. Since the "seek" cell must be a value, we need to change the cell or cells into values. In our example, we simply copy the forecast we want to analyze. Next, we changed the cells from formula's to values by copying the cells over themselves and selecting Paste Special / click on the Values option and then paste.Balance SheetIncome StatementCash Flow StatementKey FinancialsRatio AnalysisBenchmark AnalysisHorizontal AnalysisVertical AnalysisPro Forma Financials - Simple Projection ModelPro Forma Financials - Linear Trend ModelPro Forma Financials - Exponential SmoothingScenario AnalysisBudget AnalysisFinal BudgetsReturn to 1st WorksheetGeneral InputWksh3Wksh4Wksh6Wksh5Wksh7Wksh9Wksh10Wksh11Wksh12Wksh13Wksh8Wksh16Wksh15HomeWksh2

HomeWksh2Budget Analysis forWksh3Wksh4X Y Z Corporation USAWksh5Wksh6Wksh7Wksh8Once we complete our forecast, we can summarize and review it before finalizing itWksh9Wksh10into the form of budgets. We also need to summarize our assumptions that shouldWksh11Wksh12go into our final budget. We can start our budget process by reviewing the differentWksh13Wksh14revenue forecast:activeWksh16AnnualAnnualAnnualAnnualAnnualPeriodPeriodPeriodPeriodPeriod20012002200320042005Summarize Revenue Forecast:Simple Projection Model30,74234,43138,56243,19048,373Linear Trend Model12,68316,55920,43524,31128,188Wt Moving Avg Model26,07026,41326,31626,35526,340Declining Growth Model29,64431,42232,67933,17031,000Historical Data12,07616,71921,19624,73727,448Projection using declining growth rates:Gross Revenues29,64431,42232,67933,17031,000In addition to using linear models for forecasting, we can apply several non-linear (curve) models:Logarithmic - Used when rate of change in data suddenly shifts upward or downward.Power - Used when rate of change in data occurs at a specific rate.Exponential - Used when rate of change is increasing or decreasing at ever higher rates.Polynomial - Used when rate of change fluctuates with no pattern.Logarithmic TrendActualPredictedSlopeInterceptFormula for Logarithmic Trendlinex factorValuesValue yc factorb factor112,076(11,242)9600.91840747211242.3364802207y = ( c * LN (x)) - b216,719(4,587)321,196(695)LN: Natural Logarithm424,7372,067527,4484,21065,96077,44088,72299,8531010,865Power TrendlineActualPredictedSlopeIntercepty = b * x^cx factorValuesValue yc factorb factor112,07611,9510.51758980899.3885982313216,71917,10911951.3345780497321,19621,104424,73724,493527,44827,491630,212732,721835,063937,2671039,356Exponential Trendline< - calculate using c and b factor - >ActualPredictedSlopeInterceptPredictedx factorValuesValue yc factorb factor( c * x)EXPValue yy = b * EXP ( c * x )112,07613,0610.20339008899.27401935190.203391.225550448613,061216,71916,00710657.50216667250.406781.501973902116,007321,19619,6180.610171.840744789519,618424,73724,0430.813562.255925602524,043527,44829,4651.016952.764750634129,465636,1111.220343.388341379936,111744,2561.423734.152583298244,256854,2381.627125.089200323954,238966,4721.830516.2370717466,4721081,4642.033907.643846068981,464Polynomial TrendlineActualPredictedy = (c2 * x^2) + (c1 * x^1) + bx factorValuesValue yc2c1b112,07611,997-342.85714285715933.34285714286406.6000000001216,71916,902321,19621,121424,73724,654527,44827,502629,664731,140831,930932,0351031,454Summarize Non Linear Curves on Graph:1996199719981999200020012002200320042005Logarithmic Trendline(11,242)(4,587)(695)2,0674,2105,9607,4408,7229,85310,865Power Trendline11,95117,10921,10424,49327,49130,21232,72135,06337,26739,356Exponential Trendline13,06116,00719,61824,04329,46536,11144,25654,23866,47281,464Polynomial Trendline11,99716,90221,12124,65427,50229,66431,14031,93032,03531,454Actual Revenues12,07616,71921,19624,73727,448Variance Analysis of Past Budgets:Accuracy in the budget process should be examined to determine the degree of error orvariance in the budget process. If the variance is high, this indicates a need to improveplanning techniques within the company.TBD: To be Determined(Wksht 16)200120022003200420002001Income Statement ItemsTotal Revenues - Budgeted10,50014,50022,50028,50030,00030,500Total Revenues - Actual12,07616,71921,19624,73727,448TBD% difference from actual-13%-13%6%15%9%0%Cost of Goods Sold - Budgeted(4,500)(6,500)(8,648)(9,650)(11,000)(11,929)Cost of Goods Sold - Actual(4,950)(7,050)(8,233)(9,050)(10,150)TBD% difference from actual-9%-8%5%7%8%0%Operating Income - Budgeted3,1004,9009,00011,00010,50011,146Operating Income - Actual3,8155,7768,3099,99510,150TBD% difference from actual-19%-15%8%10%3%0%Net Income - Budgeted2,1004,1006,5009,0009,3007,986Net Income - Actual2,9254,9686,2407,9117,701TBD% difference from actual-28%-17%4%14%21%0%Balance Sheet ItemsCurrent Assets - Budgeted3,4504,4006,2507,5007,9008,253Current Assets - Actual3,8955,0255,7636,8047,511TBD% difference from actual-11%-12%8%10%5%0%NonCurrent Assets - Budgeted10,90014,00022,00027,50029,50031,555NonCurrent Assets - Actual13,25116,33519,95125,37526,602TBD% difference from actual-18%-14%10%8%11%0%Current Liabilities - Budgeted3,7505,6008,2009,0509,40010,715Current Liabilities - Actual4,3126,2457,3758,5909,687TBD% difference from actual-13%-10%11%5%-3%0%NonCurrent Liabilities - Budgeted1,7502,4503,7504,9005,1005,250NonCurrent Liabilities - Actual1,8102,5003,3014,4904,945TBD% difference from actual-3%-2%14%9%3%0%Ratio ItemsCurrent Ratio - Budgeted0.920.790.760.830.800.77Current Ratio - Actual0.900.800.780.790.78TBD% difference from actual2%-2%-2%5%3%0%Total Asset Turnover - Budgeted0.680.720.800.800.790.77Total Asset Turnover - Actual0.700.780.820.770.80TBD% difference from actual-3%-8%-3%4%-2%0%Gross Profit Margin - Budgeted60%60%60%60%60%0.61Gross Profit Margin - Actual59%58%61%63%63%TBD% difference from actual2%4%-2%-5%-5%0%Net Profit Margin - Budgeted19%25%28%30%28%26%Net Profit Margin - Actual24%30%29%32%28%TBD% difference from actual-22%-16%-5%-6%-0%0%Debt to Common Equity - Budgeted0.450.500.600.650.550.48Debt to Common Equity - Actual0.500.630.630.570.53TBD% difference from actual-11%-20%-4%13%4%0%Return on Equity - Budgeted20%29%32%35%30%24%Return on Equity - Actual24%33%35%33%26%TBD% difference from actual-16%-13%-9%5%16%0%We can use specific measurements to track and control forecasting errors:Mean Absolute Error - An absolute value of forecast errors, does not place weight on theamount of the error. Calculated as the sum of (actual values - predicted values) / n.Mean Square Error - Similar to Mean Absolute Error, but does place more emphasis onthe amount of error; i.e. an error of 8 is twice as significant as 4. Calculated as thesum of (actual values - predicted values)^2 / n.Root Mean Square Error - To make the Mean Square Error useful and comparable to the MeanAbsolute Error, we can take the square root of the Mean Square Error. We can then use thisas a guide to establish an error limit or standard for flagging unacceptable errors.Is ErrorActualForecastedErrorOutsideExample: Total RevenuesPeriodRevenuesRevenuesErrorAbsoluteSquaredLimit?n: total number of periods199612,07610,5001,5761,5762,483,776No199716,71914,5002,2192,2194,923,961Yes199821,19622,500(1,304)1,3041,700,416No199924,73728,500(3,763)3,76314,160,169Yes200027,44830,000(2,552)2,5526,512,704Yesn =>5Sum =>(3,824)3,82414,622,976YesMean Absolute Error765Mean Square Error2,924,595Root Mean Sqr Error1,710Establish Error Limits1,710

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Simple Projection ModelLinear Trend ModelWt Moving Avg ModelDeclining Growth ModelHistorical DataPeriodsTotal RevenuesForecast Comparisons

HomeWksh2Final Budgets forWksh3Wksh4X Y Z Corporation USAWksh5Wksh6Wksh7Wksh8Now that we have analyzed our historical data and placed it into a set ofWksh9Wksh10forecast, we can pull it all together with our assumptions for a final budget.Wksh11Wksh12Many of these assumptions should be included in our forecast for improvedWksh13Wksh14accuracy. However, we need to fine tune and finalize all assumptionsWksh15activeso that we can produce a final finished budget for planning purposes.BudgetPeriodRef2001Assumptions & CommentsOperating Plan16-1Total Revenues30,500Based on review of Pro Forma Financials, Marketing, etc.16-2Cost of Goods Sold(11,929)Volume projections, production budgets, and vertical analysis16-3Operating Expenses(7,424)Average % of Sales per Vertical Analysis16-4Operating Income11,14616-5Interest Expenses(310)Based on anticipated levels of debt and past history16-6Income Taxes(3,300)Based on anticipated taxable income and effective rate16-7Other Non Operating Expenses(200)Provision for contingency was added on this line item16-8Earnings Before Extra Ord Items7,33616-9Extra Ordinary Items650Per our Simple Model Forecast16-10Net Income7,986Financial PlanBudgeted Cash Flows16-11Net Income7,98616-12Depreciation and Amortization470Review of Simple Model Forecast and Capital Expenditure Budget16-13(Increase) Decrease Defer Taxes016-14(Gain) Loss on Sale of Assets15Per Simple Forecast Model16-15(Increase) Decrease Current Assets(724)Same formula as used in forecast models16-16(Increase) Decrease Current Liab988Same formula as used in forecast models16-17Operating Cash Flow8,735Investment Sources of Cash:16-18Planned Sale of Assets100Per Simple Model Forecast16-19Planned Sale of Investments2,200Per Simple Model Forecast16-20Other Investment Sources to be used016-21Total Investment Sources of Cash2,300Planned Investments:16-22Capital Expenditures(4,500)Budgeted $ 4.5 million in Capital Expenditure Budget16-23Acquisitions in Other Co's(350)Per forecast, strategic plan, and other budgets16-24Purchases of Investments(2,500)Per forecast, strategic plan, and other budgets16-25Total Investment Applications of Cash(7,350)Cash Flow from Financing Activities16-26Proceeds from Loans & Debt1,450Per Financing Requirements and other budgets16-27Proceeds from Minority Interest15Per historical financials and investment budget16-28Other Financing Activities016-29Total Financing Sources of Cash1,465Cash Flow Applied for Financing:16-30Payments on Loans and Debt(1,250)Per forecast and other budgets16-31Dividends Paid to Shareholders(2,500)Per Simple Model Forecast16-32Purchase / Retire Stock(1,500)Per strategic plan and other budgets16-33Other Financing Activities016-34Total Financing Applications of Cash(5,250)16-35Total Change to Cash(100)16-36Beginning Cash Balance87016-37Forecasted Ending Balance770Budgeted Balance Sheet16-38Cash and Cash Equivalents770Per above16-39Short Term Marketable Securities10Per historical financials16-40Accounts Receivable3,050Same formula as used in forecast models16-41Inventory2,440Same formula as used in forecast models16-42Other Current Assets1,983Same formula as used in forecast models16-43Total Current Assets8,25316-44Fixed Assets32,600Same formula as used in forecast models16-45Accumulated Depreciation(3,480)Same formula as used in forecast models16-46Net Fixed Assets29,12016-47Longterm Investments1,205Same formula as used in forecast models16-48Investments in Other Companies1,000Per review of forecast and strategic plans16-49Intangibles and Other Assets230Per review of forecast and historical balances16-50Total Non Current Assets31,55516-51Total Assets39,80816-52Accounts Payable5,185Same formula as used in forecast models16-53Short Term Borrowings3,660Same formula as used in forecast models16-54Short Term Portion of LT Debt40Per review of forecast and historical information16-55Other Current Liabilities1,830Same formula as used in forecast models16-56Total Current Liabilities10,71516-57Longterm Debt / Borrowings4,150Same formula as used in forecast models16-58Other Longterm Liabilities1,100Per review of historical information and expected growth rates.16-59Total Non Current Liabilities5,25016-60Total Liabilities15,96516-61Preferred Stock016-62Common Equity2,200Per Simple Model Forecast16-63Additional Paid in Capital5,700Per Simple Model Forecast16-64Retained Earnings25,491Same formula as used in forecast models16-65Adj for Foreign Currency Translation(5,000)Per Simple Model Forecast16-66Treasury Stock(3,050)Same formula as used in forecast models16-67Total Equity25,34116-68Total Liabilities and Equity41,30616-69External Financing Required(1,499)

Balance SheetIncome StatementCash Flow StatementKey FinancialsRatio AnalysisBenchmark AnalysisHorizontal AnalysisVertical AnalysisPro Forma Financials - Simple Projection ModelPro Forma Financials - Linear Trend ModelPro Forma Financials - Exponential SmoothingScenario AnalysisBudget AnalysisFinal BudgetsReturn to 1st WorksheetGeneral InputAfter reviewing all models on a graph and noting that the growth rates are declining for Revenues, a final "declining" model was added to fill out all possible forecast.A polynomial trendline is a curved line that is used when data fluctuates. It is useful, for example, for analyzing gains and losses over a large data set. The order of the polynomial can be determined by the number of fluctuations in the data or by how many bends (hills and valleys) appear in the curve. An Order 2 polynomial trendline generally has only one hill or valley. Order 3 generally has one or two hills or valleys. Order 4 generally has up to three.An exponential trendline is a curved line that is most useful when data values rise or fall at increasingly higher rates. You cannot create an exponential trendline if your data contains zero or negative values.A power trendline is a curved line that is best used with data sets that compare measurements that increase at a specific rate for example, the acceleration of a race car at 1-second intervals. You cannot create a power trendline if your data contains zero or negative values.A logarithmic trendline is a best-fit curved line that is most useful when the rate of change in the data increases or decreases quickly and then levels out. A logarithmic trendline can use negative and/or positive values.If you have a third order, then the formula would be:

y = (c3 * x^3) + (c2 * x^2) + (c1 * x^1) + b

and so forth.Entering the polynomial formula is not easy. We need to enter the formula as an array, go back and edit the formula to add the range of powers, and then post again as an array. Here are the steps:

Since we are using 2 powers, we will have two c values and one b value; thus we have an array of three cells (G101:I101).

Highlight all three cells, select the function LINEST, select known y values (E101:E105) and known x values (D101:D105). Do NOT click and paste the values => Hit Shift / Control / Enter on your keypad at the same time to paste an array. This gives us the slope and intercept without any powers. Next, highlight the three output cells again (G101:I101), edit the formula by adding the powers in brackets; i.e. ^{1,2} to the existing formula. Once again, hit Shift / Control / Enter to paste the array values.Logarithmic TrendlinePower TrendlineExponential TrendlinePolynomial TrendlineActual RevenuesPeriodsTotal RevenuesNon Linear Trends0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000Setting a reasonable limit requires a review of past history and other factors. However, we can begin by looking at the Root Mean Square Error as a starting point.Balance SheetIncome StatementCash Flow StatementKey FinancialsRatio AnalysisHorizontal AnalysisVertical AnalysisPro Forma Financials - Simple Projection ModelPro Forma Financials - Linear Trend ModelPro Forma Financials - Exponential SmoothingScenario AnalysisBudget AnalysisFinal BudgetsBenchmark AnalysisReturn to 1st WorksheetGeneral InputWksh3Wksh4Wksh6Wksh5Wksh7Wksh9Wksh10Wksh11Wksh12Wksh15Wksh14Wksh13Wksh8HomeWksh2

Microsoft Excel 9.0 Answer ReportWorksheet: [Detail_Analysis.xls]13 - Pro Forma (Exp)Report Created: 3/16/2002 3:42:28 PMTarget Cell (Min)CellNameOriginal ValueFinal Value$G$60Mean Squared Error Square20,525,54912,297,836Adjustable CellsCellNameOriginal ValueFinal Value$D$24Set Smoothing Factor0.701.00ConstraintsCellNameCell ValueFormulaStatusSlack$D$23Smoothing Factor must be between 0 and 10$D$23>=$D$23Binding0$D$24Set Smoothing Factor1.00$D$245.00%4.50%$G$25Assign weights to appropriate periods35.00%34.50%$H$25Assign weights to appropriate periods60.00%59.50%ConstraintsCellNameCell ValueFormulaStatusSlack$I$25Assign weights to appropriate periods100.00%$I$25=$E$23Binding0$D$25Assign weights to appropriate periods0.00%$D$25=$D$23Not Binding4.50%$G$25Assign weights to appropriate periods34.50%$G$25>=$D$23Not Binding34.50%$H$25Assign weights to appropriate periods59.50%$H$25>=$D$23Not Binding59.50%