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Essay / Research Paper Abstract
This 3 page paper prepares accounting forecasts along with a forecast for working capital for Microsoft assuming a 20% increase in revenues. The calculations are shown. The bibliography cites 3 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEmicrofore.rtf
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Unformatted sample text from the term paper:
the level of growth and costs, these can then be used to produce some accounts that forecast the potential outcome of the following year, and from this the working capital
needs can be calculated. To demonstrate this we can look at Microsoft. Using the accounts that end in 2009, the assumption is that the revenues are going to increase by
20%. We will also assume that all costs will remain the same proportion revue as they are at the moment. Figures are given in $millions. There are some unknowns, so
we will assume the net interest payments also increase by 20%. The tax burden is assumed to b at the same rate as in 2009, this is calculated at 26.5%
on the earnings before tax, so this is applied to the new calculation. The profit and loss account (income statement) will look like this 2009 2010 Revenue
58,437 70,124.4 Cost of goods sold 12,155 14,586.0 Gross profit 46,282 55,538.4 SG&A 16,909 20290.8 R&D 9,010 10812 Operating income 20,363 24,436 Interest payments 542 650.4 Profit before tax 19,821
23,785 Income taxes 5,252 6302.4 Income after taxes 14,569 17,483 This shows that there will be an increase in the level of the sales and profits. However, it is also
likely that the firm will need to be able to support an increase in the working capital to support these sales. To calculate the working capital we need to
total current assets and the total current liabilities (Chadwick, 2004), so for 2010 we need to forecast these. These can only be estimated, but using a ratio analysis it is
possible to look at the ratios for the last set of results and assume that they remain consistent, and from this it is possible to assess the level of working
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