Business Administration 1220E Chapter Notes -Retained Earnings, Sensitivity Analysis

• School: Western University
• Department: Business Administration
• Course: Business Administration 1220E
• Professor: Poulopoulos

Document Summary

How large will the bank loan have to be six months from now?) A projected statement is only as good as the estimates, assumptions, and judgement that went into its preparation. Three sources of information can be used to prepare projected statements: managers" estimates (e. g. , a sales forecast, past financial relationships (e. g. , financial ratios of the previous year, assumptions as to what might occur. Always begin a set of projected statements with the statement of earnings, followed by the statement of retained earnings, and then the balance sheet. Guidelines : estimating a new sales volume is the first and most important step. Use managers" estimates and/or past growth trends as guidelines: use the profitability ratio analysis to estimate cost of goods sold, gross profit, and operating expenses. When projected operating expenses, think about how each expense behaves: prepare more than one projected statement of earnings when appropriate.