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2000, Irwin/McGraw-Hill.
puter program is protected by copyright law.
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Instructions for Using PROFORMA
PROFORMA converts user-supplied information and assumptions about a company into pro
forma financial forecasts for as many as five years into the future. It also provides a ratio
analysis and a sustainable growth analysis of the results. Additional "what-if" analysis can
be easily performed. The program HISTORY, also in this workbook, offers a convenient
way to develop the user-supplied information and assumptions required by PROFORMA.
Table Contents
A Pro forma assumptions
B Pro forma balance sheets 1-5 years
C Pro forma income statements 1-5 years
D Pro forma ratio and sustainable growth analysis
All of the worksheets in PROFORMA are tied to the Main Menu, from which you selected the
Instructions button. To launch the other worksheets, simply choose the appropriate button from
the Main Menu. You can return to the Main Menu at any time by selecting the Main Menu
button from any worksheet.
You may want to begin by printing a copy of these instructions. To do so, use the regular
Print command in your software. You can print any of the Output Tables this way.
1. Leave the instructions and return to the Main Menu by clicking on the Main Menu button
at the top of this page. At the Main Menu, select Input Data and fill in the fields
in the dialog box. When you have finished, you will see Table A.
2. Table A is where you need to enter your assumptions and forecasts. Fill in the fields
in light blue. You are not required to enter information in every field if the field is not relevant.
You may also customize any label in blue simply by typing over the field name.
3. When you have completed the information in Table A, click on the Analyze button. This
will return you to the Main Menu.
4. To view the output, click on the View Tables button and select the Table you wish to
view. In order to view another table, simply return to the Main Menu and repeat this process.
What If Analysis
If you are interested in doing a "what if" analysis of your initial pro forma forecast, you can do
Clear
The Clear button on the Main Menu clears all the tables so you can analyze another company.
If you want to save your work, use the Save As command in your software and rename this program.
Discussion of Output
1. The red field labeled "Required External Financing" at the bottom of the Balance Sheets is the
amount of external financing calculated by the computer that is implied by your forecasts.
A positive number in the field implies a need for cash. The ensuing calculations assume
the financing requirements are funded with short-term debt and assess interest expense accordingly.
A negative financing requirement is assumed to be invested in securities and earns interest.
Interest income and expense, and the ratios in Table D, are consistent with these assumptions.
Once you know the sign and magnitude of the external financing requirement, you can fine-tune
your forecast by assuming all or a portion of the financing will be funded with long-term debt
or equity; or that a negative financing requirement will be invested in securities. To enter these
adjustments, return to Table A using the View Output button at the Main Menu. Make your changes
at the bottom of Table A in the fields labeled for fine tuning. Remember that these adjustments
are INCREMENTAL to the forecast numbers. Click the Analyze button when you are finished.
2. The forecast assumes that dividends will be paid only if income available for common is positive.
3. The ratios in Table D are the same as those in Table F of HISTORY. See the instructions to
History for detailed definitions.
Actuals:
Net sales
Net plant
Long-term debt
Owner's equity
Accrued taxes
Other accruals
Current portion l-t debt
Deferred taxes
Other deferrals
Minority interests
Other long-term liabilities
Preferred stock
Once FINANCING has been estimated, use items below for fine-tuning…
Incr. (decr.) in securities
Incr. (decr.) in long-term debt
Incr. (decr.) in equity
Sum adjustments
Dell
$ in Millions
December 31
ASSETS
Cash $- $- $- $- $-
Securities - - - - -
Accounts receivable - - - - -
Inventory #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other current assets - - - - -
Total liabilities - - - - -
Preferred stock - - - - -
Owners' equity Err:522 Err:522 Err:522 Err:522 Err:522
Total equity Err:522 Err:522 Err:522 Err:522 Err:522
Dell
$ in Millions
December 31
Net sales $- $- $- $- $-
Cost of goods sold - - - - -
Gross profit - - - - -
Operating expenses - - - - -
Operating income - - - - -
Dell
PROFITABILITY RATIOS:
Return on equity (%) Err:522 Err:522 Err:522 Err:522 Err:522
Return on assets (%) Err:522 Err:522 Err:522 Err:522 Err:522
Return on inv. captial (%) Err:522 Err:522 Err:522 Err:522 Err:522
Profit margin (%) Err:522 Err:522 Err:522 Err:522 Err:522
Gross margin (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
TURNOVER-CONTROL RATIOS:
Asset turnover (x) Err:522 Err:522 Err:522 Err:522 Err:522
Inventory turnover (x) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Collection period (days) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Days sales in cash (days) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Payables period (days) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Fixed asset turnover (x) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
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ProformaDialog
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TableViewer
PROFORMA Tables
Table A: Assumptions
Cancel
Table B: Balance Sheets
Table C: Income Statements
● Table D: Ratio and Sustainable Growth Analysis
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