Case Study: Financial Forecasts
Undertake your own research to obtain an organization's LATEST THREE- YEAR annual reports. You can use one from an organisation with which you are familiar or one which is freely available on the internet (company's website) or from ASIC or ASX.
Company - CALTEX:
You are the Financial Planning and Analysis manager of the company you are choosing. In order to invest a project, the company is planning to apply for a loan from the bank. You were assigned by the CEO the task of advising the Board of Directors about the financial forecasts and the company's ability to meet the long-term obligations.
The proposed loan details are shown as below:
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Proposed Loan Details
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Loan amount:
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#########
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Loan term:
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4 years
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Interest rate
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6.50%
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Payment frequency:
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Monthly
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Required:
Problem 1: You are required to undertake your own research from the company's website, and read all the relevant information from the annual reports to understand and identify the organizational policy and procedures in regards to (not limited to) sales, inventory management, collection policy, credit, purchasing and payment policy and cost structures.
Problem 2: Calculate the financial ratios for the actual three years by using the following template. You can calculate the relevant ratios based on a year-end balance instead of the average beginning and ending year balance.
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Financial ratios
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Actual year 1 - 20XX
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Actual year 2 - 20XX
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Actual year 3 - 20XX
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Return on Equity
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Return on Assets
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Debt to Equity Ratio
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Time Interest Earned
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Days in Receivables
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Days in Inventory
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Days in Payables
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Current Ratio
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Quick Ratio
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Problem 3: Briefly comment the profitability, liquidity and solvency of the company based on the financial ratios you calculated in the Part 2.
Problem 4: You are required to identify timeframes and parameters to be used for the financial forecasts.
Problem 5: You are required to use the EXCEL to include all the parameters or assumptions (i.e. key forecast drivers) used, and prepare proforma income statement and balance sheet.
Problem 6: You are required to forecast the free cash flow for the company.
Problem 7: You are required to write a REPORT (refer to Notes to the Students for more information) to include all the information and workings used in the preparation of proforma income statement and balance sheet, and free cash flow forecast.
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Attachment:- Prepare Financial Forecasts and Projections.rar