Assignment Details
Utilizing the fictitious company Tag-It Corporation, prepare next year’s forecast with a pro forma income statement. Here is the current income statement for Tag-It:
Tag-It’s CEO has predicted a 10% increase in total revenue next year. Utilizing the percentage of sales method, prepare a forecast for next year in the section provided on the Excel spreadsheet provided.
The total revenue numbers over the past 4 years for Tag-It Corporation were as follows:
Values in Millions:
72,618
73,785
69,495
71,879
Determine whether you think Tag-It can hit the target of a 10% increase in sales next year.
Submit the Excel spreadsheet provided, saved with your name, which must include the answers to the 2 questions:
- An updated forecast for next year, and
- The answer to the question regarding the target sales.
| FINA310 UNIT 3 IP TEMPLATE FOR STUDENTS | |||||||
| Student name: | |||||||
| Date: | |||||||
| ACTUAL | FORECAST | ||||||
| 2018 | 2019 | ||||||
| Total Revenue | $ 71,879 | ||||||
| Cost of Revenue | $ (51,125) | ||||||
| Gross Profit | $ 20,754 | ||||||
| Operating Expenses: | |||||||
| Selling, General, and Administrative | $ (14,248) | ||||||
| Research and Development | $ – | ||||||
| Special Income/Other Charges | $ (2,194) | ||||||
| Total Operating Expenses | $ (16,442) | ||||||
| Operating Income | $ 4,312 | ||||||
| Net Interest Income | $ (666) | ||||||
| edite | |||||||
| Pre-Tax Income | $ 3,646 | ||||||
| Provision for Income Tax (19.5%) | $ (711) | ||||||
| Net Income | $ 2,935 | ||||||
Solution
A
| Student name: | |||||||
| Date: | |||||||
| ACTUAL | % of Sale | FORECAST | |||||
| 2018 | 2018 | 2019 | |||||
| Total Revenue | $ 71,879 | 100.00% | $ 79,067 | ||||
| Cost of Revenue | $ (51,125) | -71.13% | $ (56,238) | ||||
| Gross Profit | $ 20,754 | 28.87% | $ 22,829 | ||||
| Operating Expenses: | |||||||
| Selling, General, and Administrative | $ (14,248) | -19.82% | $ (15,673) | ||||
| Research and Development | $ – | $ – | |||||
| Special Income/Other Charges | $ (2,194) | -3.05% | $ (2,413) | ||||
| Total Operating Expenses | $ (16,442) | -22.87% | $ (18,086) | ||||
| Operating Income | $ 4,312 | 6.00% | $ 4,743 | ||||
| Net Interest Income | $ (666) | -0.93% | $ (733) | ||||
| edite | |||||||
| Pre-Tax Income | $ 3,646 | 5.07% | $ 4,011 | ||||
| Provision for Income Tax (19.5%) | $ (711) | -0.99% | $ (782) | ||||
| Net Income | $ 2,935 | 4.08% | $ 3,229 | ||||
| 2,015 | 2,016 | 2,017 | 2,018 | |
| Revenue | $ 72,618.00 | $ 73,785.00 | $ 69,495.00 | $ 71,879.00 |
| Revenue growth | 1.6% | -6.2% | 3.3% |
B
The answer to the question that if Tag-It is expected to hit its targeted revenue growth of 10% would be; Not probably. This answer is based on the historical trend of its revenue growth for the last four years which shows that the company was not able to jump even the 5% of revenue growth barrier. However, its revenue declined in 2017 by 6.2%. It is expected that the company can show a positive revenue growth in 2019, however a 10% growth in revenue would be a long call.
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