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Developingpro forma financial statements and cash flow forecasts depends heavilyupon sales forecasts. Imagine you are a financial analyst working for amajor stockbroker, and you are trying to develop a one-year salesforecast for a major national department store. List five pieces of information you want to obtain to aid you in your forecast, and explain why they will aid you in your forecast.Nowthat you have made your best prediction of next year’s sales, you willwant to estimate next year’s cost of goods sold. Pick two pieces of information you definitely want to obtain in order to help you with this task, and explain why they will be helpful.Just do response each posted # 1 to 3 only down below.Posted 1 Good morning class, When making sales forecasts, it’s important to have detailedinformation about a company. For starters, an analyst would want to knowhow a firm performed in previous years, as a company’s past performanceis indicative of future performance. He should also like to have dataabout similar companies: by having this he is better able to judge hiscompany’s performance. Additionally, he needs macroeconomic data tocontextualize his company’s past performance and anticipate the economicconditions for the future year. Information on marketing, and itscorrelation with sales, would also be useful. Lastly, the analystsshould like to have additional information on how the supply and demandfor his company’s product(s) is expected to change in the coming year. Two useful pieces of information for estimating COGS would be (1)previous COGS and (2) how much inventory (in terms of quantity) thecompany plans to purchase. Both data points are necessary forforecasting future costs. Posted 2 When predicting the future sales forecast it is important to considerthese five things in order to most accurately depict what is to come.One item would be the economy of which your company is participating inand the the health of the market. The conditions will show the amount ofmoney being traded by consumers in the market and if the market will besustained or in decline. The next item would be the sales returns inallowances that shows the companies ability to maintain a sale. The nextwould direct cost as this shows the amount of cost related to the salesto determine part of the gross margin that helps in determiningfinancial standing. Another would be demand sustainability as if thecompany can maintain the demand of the product or if they are overproducing causing a stagnate inventory this could also be looked atthrough the inventory turnover. Lastly look in the selling price perunit to depict the potential money to be made of each sale and the pricecompared to the market. To determine the potential COGS you first haveto look into historical data that will have a percentage to base thepotential of future cost. Another factor would be to look an inventoryand fluctuation of the cost of the raw materials that make up thematerial. As the industry and the economy change the cost willfluctuate.Posted 3 Ff I was a financial analyst, in order to better forecast the sales of next year, I would want to obtain data on competitors within the industry, economic conditions, historical data, the company’s budget, and different trends in sales. Obtaining data regarding competitors will help in comparing one company to the other; possibly using one as a benchmark. Monitoring economic conditions will allow a company to see any increases or decreases in supply and demand as well as other circumstances such as interest rates and more. Historical data is probably the first source in forecasting. This is concrete data that is readily available and describes the past. Knowing the company’s budget and what they can spend determines what they are capable of (to an extent) in the future. Lastly, looking at trends in sales can put a company in a better position to project future sales. They can look at the percentage increases or decreases that have happened in the past. In order to predict next year’s cost of goods sold, the pieces ofinformation that I would want are manufacturing costs as well as salaryand wages. Some employees may get raises so knowing this information canhelp in estimating cost of goods sold. Additionally, being familiarwith manufacturing costs or how much the manufacturer is going to raiseor lower prices is a good determinant in accurate forecasting. Knowingthis type of information will better suite management in forecasting thefuture.
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