Fast Chain Model

Reactive Supply Chain Strategy

Primary Activities

“Efficient” Chain Model

Support Activities
Financial Forecasting is
rendering into number of
assumptions that entrepreneurs
make about how their sales will
move, how costs will behave,
what kind of profit they will
attain, what assets they will
require, and how they will
finance those assets.
• It is an estimate of future
financial outcomes for a
company or project, usually
applied in budgeting, capital
budgeting and / or valuation.

• A forecast is an educated
prediction for the upcoming
year about how much money
your company will likely bring
in, so that you can estimate
what you can afford to spend,
and what your profit margin
will be.
 Critical Variables in Financial Forecasting

• It is important to examine the

critical variables that affect the
industry and business and
assess how these variables will
behave. It is better to use the
simpler approach instead of the
complex analysis of financial
forecasting – past trends, cycles
and patterns to predict the
future.
 Critical Variables in Financial Forecasting

o The critical variables that have

affected our business in the
past and the present will not
change significantly in the
future.

o The environment or market we

operate in will more or less,
move along trends, cycles and
patterns we saw in the past and
continue to see at present.
 Critical Variables in Financial Forecasting

o If the critical variable and

the environmental or
market conditions are
expected to change, then
we must input these
things in our forecast.
1. For an accurate budget preparation

2. Helps determine how much monthly

business loan payment could
reasonably be handled

3. Easier to stay on budget throughout

the year

4. Helps budget business expenses

early because
5. Forecasting will also help you
time important moves— bringing
in a new hire, launching a new
marketing campaign, or cutting
costs during slow seasons—to
match the predicted revenue
throughout the year.

6. A detailed, well-researched
forecast can even help convince
lenders or investors to contribute
funds to your business.
7. To make the best possible choices
for the business.
 How to Forecast Revenue

1. Choose between judgment forecasting or quantitative forecasting (or

a mixture).

2. Start with last year’s revenue statements for a basis of prediction.

 How to Forecast Revenue

3. Consider any recent changes in personnel, products, pricing,

competition, or other factors.

4. Calculate anticipated revenue

5. Separate individual income sources to get a clear picture of potential

ups and downs from each revenue stream

6. Constantly review and update the forecast to reflect changes in your

business
• Income Statement Forecasting

o Sales and Cost of Sales – in

determining selling prices, many
companies add a specific percentage
mark-up or margin to the Cost of
Sales (Cost of Goods Sold), thus
establishing a ratio between the two ▪ However, not all has the luxury
items of determining their own
prices. Market prices tend to
Ex.: A 100% mark-up on Cost of be relatively low in a very
Sales, the Sales figure will double competitive business.
the Cost of Sales. As a percentage, Enterprises are forced to slap
Cost of Sales will therefore be 50% lower mark-ups or margins on
of Sales. their Cost of Sales.
• Forecasted revenue is
calculated by taking the
average selling price (ASP)
for future periods and
multiplying that by the
number of expected units
sold.
 Increase (Decrease)
Account Title 2019 2018 In Amount In %
Sales 550,000 420,000 130,000 30.95
Sales Returns & Allowances 30,000 20,000 10,000 50.00
Net Sales 520,000 400,000 120,000 30.00
Cost of Sales 260,000 190,000 70,000 36.84
Gross Profit 260,000 210,000 50,000 23.81
Operating Expenses 142,100 106,200 35,000 33.80
Interest Expense 46,000 38,750 7,250 18.71
Net Income 71,900 65,050 5,850 8.99
1. How important is financial forecasting for the business?

2. If you are an entrepreneur, what critical variable will you consider that
will affect most with your financial forecast? Why?

3. Considering the pandemic situation that happened today, how will

this affect with your financial forecast? Are you still going to pursue
for a brighter forecast?
 Activities

1. Make a 5-year financial forecast for your group’s

business/product starting from 2019 - 2023.

2. Follow the given SCI format, the group should

collaborate to provide the given amount from 2015-2018
as past trends basis.
 Activities

3. Write your group’s business name & product. Justify each

year’s percentage increase or decrease of your forecast
considering all the critical variables.

4. Individual activity, to be submitted tomorrow until 5:00 pm