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Financial Analysis & Forecasting

Purpose of Spreadsheet:

Prepared by Matt H. Evans, CPA, CMA, CFM


Revised: 11/22/2002
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To illustrate concepts related to financial analysis and forecasting. The financial analysis uses a combination of ratios and industry averages to evaluate the financial performance of the company. Trend line graphs are also generated, comparing the company's performance with the industry averages. Finally, the historical information is used to prepare a set of pro forma financial statements using both linear and non-linear functions. Required Inputs: You will need to collect financial statements for several reporting periods. If you want to benchmark the performance against the industry, then you will also need to collect industry averages. The spreadsheet is setup to capture five reporting periods (annual, quarterly, monthly). All input fields are highlighted in yellow. For best results, SEC Filings are suggested since these reports provide more detail than published financial statements.

Note: A small red triangle in the upper right corner of a cell indicates that a comment has been inserted. Point your mouse over the cell and the comment will appear. If a cell appears in red, this indicates a warning concerning a calculation. Worksheets: This spreadsheet consists of the following worksheets, divided into three sections: A) Input Worksheets for financial analysis using historical data: Worksheet 2 3 4 5 Title General Input Balance Sheet Income Statement Cash Flow Statement Purpose Enter general information here - used on several worksheets. Enter comparative balances sheets for up to five periods. Enter comparative income statements for up to five periods. Enter comparative cash flow statements for up to five periods. Prepared by Matt H. Evans 06/15/2011 Page 1

Caution: If you enter less than five years of historical information, certain worksheet formulas may have to be revised. B) Output Worksheets for evaluating financial performance: 6 Key Financial Data Calculates key financial information for further analysis. 7 Ratio Analysis Calculates a series of ratios for further analysis. 8 Benchmark Analysis Compare ratio analysis to industry averages. 9 Horizontal Analysis Horizontal analysis with corresponding trend lines. 10 Vertical Analysis Common size financials in percentages and graphs. C) Pro Forma / Forecasted Financials for Budgeting: 11 12 13 14 15 16 Pro Forma - Simple Pro Forma - Regression Pro Forma - Exponential Scenario Analysis Budget Analysis Final Budgets Set of pro forma financials using simple assumptions Set of pro forma financials using linear trending Set of pro forma financials using exponential smoothing Example of Scenario Analysis and Goal Seek Analysis Preliminary budget analysis Set of budgets per various assumptions and forecasts.

Note: Some additional worksheets (Answer Reports 1 & 2) may appear in the spreadsheet due to the running of Solver. Macros: No macros have been used in this spreadsheet to give everyone some assurance that no viruses are contained in the spreadsheet. However, you are free to add your own macros to save time. Tools > Macro > Record New Macro Excel Functions: This spreadsheet uses certain financial functions (such as =TREND) which might not be found in your version of Microsoft Excel. To take full advantage of financial and statistical functions, you should install the Add On package titled: Analysis TookPak. Go to the main tool bar, select Tools => Add-Ins => check the Analysis TookPak option, insert your Excel CD and install the Analysis ToolPak. Also, you might want to install the Solver Add-in since this is useful for solving special forecasting issues (such as finding the Prepared by Matt H. Evans 06/15/2011 Page 2

optimal exponential factor). Compatibility: This spreadsheet was created with Microsoft Excel 2000. Older versions of Excel (such as 97) may not be compatible with this spreadsheet. Corrections: With any attempt to build an Excel Model, I can easily make some mistakes. So if you have suggestions to make the model better, drop me an email and Ill be glad to improve the financial model. My email address is: matt@exinfm.com

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General Input Panel


The following general information should be entered: Note: Sample data has been entered in the input cells to help you get started. 2-1 Name of Company => X Y Z Corporation USA 2-2 Reporting Periods => Annual (Annual, Semi-annual, Quarterly or Monthly) 365

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2-3 Number of Days in Reporting Period are What reporting periods will be entered? 2-4 2-5 2-6 2-7 2-8 Most Current Period Previous Period 2nd Previous Period 3rd Previous Period 4th Previous Period

2000 (1999, July 1998, 6/30/97, etc.) 1999 (1999, July 1998, 6/30/97, etc.) 1998 (1999, July 1998, 6/30/97, etc.) 1997 (1999, July 1998, 6/30/97, etc.) 1996 (1999, July 1998, 6/30/97, etc.) 5

2-9 Number of historical periods to be analyzed

How are the amounts expressed in the financial statements? (such as: in millions of dollars, thousands of Canadian dollars, etc.) 2-10 millions of dollars

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Balance Sheet for X Y Z Corporation USA


Annual Period 1996 990 10 1020 1005 870 #REF! 14006 -1280 12726 360 65 100 #REF! #REF! 2050 1200 12 1050 #REF! 1160 650 1810 #REF! Annual Period 1997 millions of dollars Annual Period 1998 901 12 1830 1650 1370 #REF! 21826 -2100 19726 120 105 #REF! #REF! 3290 2580 25 1480 #REF! 2600 701 3301 #REF! Annual Period 1999 998 6 2250 1900 1650 #REF! 26950 -2550 24400 590 250 135 #REF! #REF! 3870 3100 30 1590 #REF! 3600 890 4490 #REF! Annual Period 2000 870 11 3040 2060 1530 #REF! 28100 -3010 25090 905 412 195 #REF! #REF! 4800 3550 36 1301 #REF! 3950 995 4945 #REF!

Description Cash and Cash Equivalents Short Term Marketable Securities Accounts Receivable Inventory Other Current Assets Total Current Assets Fixed Assets Accumulated Depreciation Net Fixed Assets Longterm Investments Investments in Other Companies Intangibles and Other Assets Total Non Current Assets Total Assets Accounts Payable Short Term Borrowings Short Term Portion of LT Debt Other Current Liabilities Total Current Liabilities Longterm Debt / Borrowings Other Longterm Liabilities Total Non Current Liabilities Total Liabilities Preferred Equity Common Equity

950 15 1550 1360 1150 #REF! 17605 -1700 15905 320 110 #REF! #REF! 3150 1830 15 1250 #REF! 1750 750 2500 #REF!

2044

2005

2069

2090

2120 Page 5

Prepared by Matt H. Evans 06/15/2011

Balance Sheet for X Y Z Corporation USA


Annual Period 1996 5013 5097 275 -1405 #NAME? #NAME? #REF! #REF! Annual Period 1997 millions of dollars Annual Period 1998 5159 9840 -550 -1480 #NAME? #NAME? #REF! #REF! Annual Period 1999 5626 15050 -2147 -1520 #NAME? #NAME? #REF! #REF! Annual Period 2000 5628 20005 -6722 -1550 #NAME? #NAME? #REF! #REF!

Description Additional Paid in Capital Retained Earnings Adj for Foreign Currency Transl Treasury Stock Total Shareholder Equity Total Liabilities & Equity Check: Assets = Liab + Equity ? Comment =>

4900 7050 120 -1460 #NAME? #NAME? #REF! #REF!

NonDepreciable Fixed Assets Deferred Taxes Goodwill Write Off No of Common Shares o/s Par Value of Common Stock No of Preferred Shares o/s Par Value of Preferred Stock Market Price of Common Stock Market Price of Preferred Stock Preferred Dividends in Arrears Liquidating value of Preferred Stk Book Value per Share Dividends per Common Share Dividend Payout Ratio Cash Dividends to Preferred Stock Cash Dividends to Common Stock Total Dividends Paid

0 112 0 1,320 $10.00 0 $22.65 $0.00 0 0 #NAME? $1.01 #NAME? 1330 1330

0 101 0 1,290 $10.00 0 $28.90 $0.00 0 0 #NAME? $1.49 #NAME? 1918 1918

0 90 0 1,302 $10.00 0 $37.05 $0.00 0 0 #NAME? $1.89 #NAME? 2461 2461

0 98 0 1,345 $10.00 0 $33.60 $0.00 0 0 #NAME? $1.75 #NAME? 2354 2354

0 109 0 1,322 $10.00 0 $29.40 $0.00 0 0 #NAME? $1.76 #NAME? 2329 2329 Page 6

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Income Statement for X Y Z Corporation USA


Annual Period 1996 12,060 16 12,076 -4950 -11 -4961 -3300 3815 -117 millions of dollars Annual Annual Period Period 1997 1998 16,700 21,170 19 26 16,719 21,196 -7050 -8233 -13 -17 -7063 -8250 -3880 -4637 5776 8309 -122 -216 -22 -790 #REF! 17 -1005 #REF! -2050 #REF! -2105 #REF! -2660 #REF! Annual Period 1999 24,700 37 24,737 -9050 -22 -9072 -5670 9995 -282 Annual Period 2000 27,400 48 27,448 -10150 -28 -10178 -7120 10150 -304

Description Net Sales Other Operating Revenues Total Revenues Cost of Goods Sold Other Operating Expenses Total Direct Expenses Selling, General & Administrative Operating Income Interest Expenses Foreign Exchange (Loss) Gain Associated Company (Loss) Gain Other NonOperating (Loss) Gain Income Tax Expense Reserve Charges Income Before Extra Ord Items Extra Ordinary Items (Loss) Gain Tax Effects of Extraordinary Items Minority Interests Net Income Primary EPS Earnings Before Int & Taxes Depreciation & Amortization Research & Devel Expenses Capitalized Interest Expense Interest Income Total Non Operating Expenses

17 #NAME? #NAME? #NAME? -310 -16 4 #REF!

302 #NAME? #NAME? #NAME? -420 -19 6 #REF!

219 #NAME? #NAME? #NAME? -400 -33 11 #REF!

303 #NAME? #NAME? #NAME? -450 -39 19 #REF!

515 #NAME? #NAME? #NAME? -460 -30 27 #REF! Page 7

Prepared by Matt H. Evans 06/15/2011

Income Statement for X Y Z Corporation USA


Annual Period 1996 #NAME? 21.36% millions of dollars Annual Annual Period Period 1997 1998 #NAME? #NAME? 17.78% 25.33% Annual Period 1999 #NAME? 21.67% Annual Period 2000 #NAME? 27.02%

Description Total Extra Ordinary Items Tax Rate

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Cash Flow Statement for X Y Z Corporation USA


Annual Period 1996 #NAME? 310 -2 -55 -162 206 #REF! -1455 -135 112 -712 162 33 #REF! 1070 -1112 -1330 5 195 -75 #REF! #REF! 1010 Annual Period 1997 millions of dollars Annual Period 1998 #NAME? 400 11 45 #REF! #REF! #REF! -3880 Annual Period 1999 #NAME? 450 -8 #REF! #REF! #REF! -5220 150 -2314 221 -12 #REF! 1880 -801 -2354 7 13 Annual Period 2000 #NAME? 460 -11 #REF! #REF! #REF! -4108 182 -2609 50 #REF! 1105 -961 -2329 8 6 -12 #REF! #REF! 998 Page 9

Description Net Income Depreciation and Amortization (Increase) Decrease Defer Taxes (Gain) Loss on Sale of Assets (Increase) Decrease Current Assets Increase (Decrease) Current Liab Cash Flow from Operations Capital Expenditures Acquisition in Other Co's Proceeds from Sales of Assets Purchases of Investments Sale of Investments Other Investment Activities Cash Provided (Used) from Investmts Proceeds from Borrowings Payments on Borrowings Dividends Paid to Shareholders Proceeds from Minority Interest Issue Stock / Exercise Options Purchase / Retire Common Stock Other Financing Activities Cash Provided (Used) from Financing Increase (Decrease) to Cash Beginning Cash Balance

#NAME? 420 11 #REF! #REF! #REF! -2750 35 -1979 129 -166 #REF! 1044 -650 -1918 12 1

-1801 330 61 #REF! 1460 -898 -2461 7 45

#REF! #REF! 990

#REF! #REF! 950

#REF! #REF! 901

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Cash Flow Statement for X Y Z Corporation USA


Annual Period 1996 #REF! #REF! #REF! millions of dollars Annual Annual Period Period 1997 1998 #REF! #REF! #REF! #REF! #REF! #REF! Annual Period 1999 #REF! #REF! #REF! Annual Period 2000 #REF! #REF! #REF!

Description Ending Cash Balance Check: Should agree to Balance Sheet Comment =>

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Key Financial Data for X Y Z Corporation USA


Annual Period 1996 #REF! 117 16 790 310 #REF! #REF! Annual Period 1997 millions of dollars Annual Annual Period Period 1998 1999 #REF! 216 33 2050 400 #REF! #REF! #REF! 282 39 2105 450 #REF! #REF! Annual Period 2000 #REF! 304 30 2660 460 #REF! #REF!

Description EBITDA : Income before ExtraOrd Items Interest Expense Capitalized Interest Expense Income Tax Expense Reserve Charges Depreciation and Amortization EBITDA EBITDA Margin Free Cash Flow: Operating Cash Flow Investment Cash Flows Preferred Dividends Paid (fixed) Redemption of Fixed Obligations Other Critical Outlays Free Cash Flow Working Capital: Current Assets Current Liabilities Working Capital Liquid Capital: Cash and Cash Equivalents Marketable Securities Accounts Receivable Notes Receivable

#REF! 122 19 1005 420 #REF! #REF!

#REF! #REF! -1112 -35 #REF!

#REF! #REF! -650 -45 #REF!

#REF! #REF! -898 -42 #REF!

#REF! #REF! -801 -30 #REF!

#REF! #REF! -961 -25 #REF!

#REF! #REF! #REF!

#REF! #REF! #REF!

#REF! #REF! #REF!

#REF! #REF! #REF!

#REF! #REF! #REF!

990 10 1020 0

950 15 1550 0

901 12 1830 0

998 6 2250 0

870 11 3040 0 Page 11

Prepared by Matt H. Evans 06/15/2011

Key Financial Data for X Y Z Corporation USA


Annual Period 1996 #REF! -1160 #REF! millions of dollars Annual Annual Annual Period Period Period 1997 1998 1999 #REF! #REF! #REF! -1750 -2600 -3600 #REF! #REF! #REF! Annual Period 2000 #REF! -3950 #REF!

Description Total Current Liabilities Long Term Debt Preferred Equity Liquid Capital

The following valuation indicators are very simple and basic; they are used as quick, rough estmates. Market Capitalization: Market Cap - Common Stk Market Cap - Preferred Stk Total Market Capitalization

$29,898 $0.00 $29,898

$37,281 $0.00 $37,281

$48,239 $0.00 $48,239

$45,192 $0.00 $45,192

$38,867 $0.00 $38,867

Present Value: Normalized Cash Flow Weight %'s 5.00% 10.00% 15.00% Normalized Cash Flow Number of Future Periods Required Rate of Return Present Value of Free Cash Flow Present Value of Selling Price $315,000 <= estimated selling price Present Value of Business Revenue Multiplier: Recent Gross Revenues Average Competitive Rev Multiplier Value based on Revenue Multiple Capitalization of Earnings: Normalized Net Income Weights %

30.00%

40.00% #REF! 15 11.00% #REF! $65,836 #REF!

27,448 3.14 $86,187

5.00%

5.00%

25.00%

30.00%

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Key Financial Data for X Y Z Corporation USA


Annual Period 1996 Annual Period 1997 millions of dollars Annual Annual Period Period 1998 1999 Annual Period 2000 #REF! 12.00% 3.50% 8.50% #REF!

Description Normalized Net Income Capitalization Rate Nominal Growth Rate Net Capitalization Rate Value based on Earnings

Operating Leverage Financial Leverage Total Leverage Check Totals 0.00

#REF! #NAME? #NAME? #NAME?

#REF! #NAME? #NAME? #NAME?

#REF! #NAME? #NAME? #NAME?

#REF! #NAME? #NAME? #NAME?

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Ratio Analysis for X Y Z Corporation USA


Annual Period 1996 0.47 #REF! Annual Period 1997 0.40 #REF! #NAME? Annual Period 1998 0.37 #REF! #NAME? Annual Period 1999 0.38 #REF! #NAME? Annual Period 2000 0.40 #REF! #NAME?

Title of Ratio Acid Test Ratio Current Ratio

Operating Cash Flow to Net Income #NAME? Liquidity Index: Cash - Days Removed Cash Balance Cash Balance Total Marketable Sec - Days Removed Marketable Securities Balance Marketable Securities Total Receivables - Days Removed Receivable Balance Receivable Balance Total Inventory - Days Removed Inventory Balance Inventory Balance Total Other - Days Removed Other Current Assets Balance Other Current Assets Total Liquidity Index (Days) Z Score: 1.2 x (working capital / total assets) 1.4 x (retained earn / total assets) 3.3 x (EBIT / total assets)

0 990 0 11 10 110 34 1020 34257 79 1005 79745 16 870 13920 33

0 950 0 12 15 180 30 1550 46158 61 1360 83261 22 1150 25300 31

0 901 0 16 12 192 31 1830 56217 67 1650 110092 26 1370 35620 35

0 998 0 15 6 90 32 2250 72213 72 1900 136018 21 1650 34650 36

0 870 0 14 11 154 36 3040 110751 71 2060 146676 19 1530 29070 38

#REF! #REF! #REF!

#REF! #REF! #REF!

#REF! #REF! #REF!

#REF! #REF! #REF!

#REF! #REF! #REF! Page 14

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Ratio Analysis for X Y Z Corporation USA


Annual Period 1996 15.46 #REF! #REF! Annual Period 1997 12.78 #REF! #REF! Annual Period 1998 11.13 #REF! #REF! Annual Period 1999 7.53 #REF! #REF! Annual Period 2000 5.90 #REF! #REF!

Title of Ratio .6 x (market value equity / b.v. debt) .999 x (sales / total assets) Z Score

Receivable Turnover: Credit Sales Average Receivable Balance Receivable Turnover Days Required to Collect A/R

11520 1060 10.9 34

15750 1285 12.3 30

20080 1690 11.9 31

23200 2040 11.4 32

26500 2645 10.0 36

Inventory Turnover: Average Inventory Balance Inventory Turnover Days in Inventory Total Asset Turnover Operating Assets Ratio

1,046 4.6 79 #REF! #REF!

1183 6.0 61 #REF! #REF!

1505 5.5 67 #REF! #REF!

1775 5.1 72 #REF! #REF!

1980 5.1 71 #REF! #REF!

Gross Profit Margin Operating Margin

59% 32%

58% 35%

61% 39%

63% 40%

63% 37%

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Ratio Analysis for X Y Z Corporation USA


Annual Period 1996 #NAME? 41% Annual Period 1997 #NAME? 42% Annual Period 1998 #NAME? 39% Annual Period 1999 #NAME? 37% Annual Period 2000 #NAME? 37%

Title of Ratio Net Profit Margin Direct Cost to Operating Revenues Capitalization Rate / Asset Return: Net Operating Income Total Investments / Operating Assets Capitalization Rate / Return Return on Shareholder Equity

3000 #REF! #REF! 24%

4749 #REF! #REF! 33%

6204 #REF! #REF! 35%

7829 #REF! #REF! 33%

7408 #REF! #REF! 26%

Debt to Total Assets Debt to Common Equity Times Interest Earned

#REF! 1 #NAME?

#REF! 1 #NAME?

#REF! 1 #NAME?

#REF! 1 #NAME?

#REF! 1 #NAME?

Price to Earnings (P/E) Price to Book Value Stock Yield

#NAME? #NAME? 4.45%

#NAME? #NAME? 5.14%

#NAME? #NAME? 5.10%

#NAME? #NAME? 5.21%

#NAME? #NAME? 5.99%

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Benchmark Analysis for X Y Z Corporation USA

You need to collect benchmark data on the respective industry for the subject company. Enter the benchmark data in the appropriate input cells. This information is used to Wksh11 Wksh12 generate trend line graphs in this worksheet. If you do not have any benchmark data, Wksh13 Wksh14 then fill in the highlighted yellow cell with numeric zero "0". The "industry" line will be null Wksh15 Wksh16 in the graph and show only the company specific ratio trend.

Ref 8-1 7-1 8-2 7-2

Description Acid Test Ratio - Industry Acid Test Ratio - Company Current Ratio - Industry Current Ratio - Company

Annual Period 1996 0.51 0.47 1.12 #REF! 8.50 10.87 41 34 4.40 4.60 86 79 1.60 #REF! 55.00%

Annual Period 1997 0.52 0.40 1.10 #REF! 8.70 12.26 39 30 4.45 5.96 88 61 1.55 #REF! 52.00%

Annual Period 1998 0.50 0.37 1.05 #REF! 8.40 11.88 40 31 4.20 5.47 81 67 1.62 #REF! 60.00%

Annual Period 1999 0.49 0.38 1.08 #REF! 8.20 11.37 41 32 4.30 5.10 89 72 1.68 #REF! 62.00%

Annual Period 2000 0.48 0.40 1.07 #REF! 8.30 10.02 41 36 4.38 5.13 82 71 1.69 #REF! 63.00% Page 17

8-3 Receivable Turnover - Industry 7-21 Receivable Turnover - Company 8-4 Days to Collect A/R - Industry 7-22 Days to Collect A/R - Company 8-5 Inventory Turnover - Industry 7-25 Inventory Turnover - Company 8-6 Days in Inventory - Industry 7-26 Days in Inventory - Company 8-7 Asset Turnover - Industry 7-27 Asset Turnover - Company 8-8 Gross Profit Margin - Industry

Prepared by Matt H. Evans 06/15/2011

7-29 Gross Profit Margin - Company 8-10 Net Profit Margin - Industry 7-31 Net Profit Margin - Company 8-11 Return on Total Assets - Industry 8-12 Return on Total Assets - Company 8-13 Return on Equity - Industry 8-14 Return on Equity - Company 8-15 Debt to Equity - Industry 7-38 Debt to Equity - Company 8-16 Times Interest Earned - Industry 7-39 Times Interest Earned - Company

58.96% 20.00% #NAME? 38.00% 30.00% 26.00% 23.93% 35% 50% 40 #NAME?

57.78% 23.00% #NAME? 36.00% #REF! 22.00% 33.44% 38% 63% 38 #NAME?

61.11% 22.00% #NAME? 37.00% #REF! 24.00% 35.28% 31% 63% 36 #NAME?

63.36% 19.00% #NAME? 34.00% #REF! 19.00% 33.42% 34% 57% 39 #NAME?

62.96% 20.00% #NAME? 36.00% #REF! 20.00% 25.89% 32% 53% 43 #NAME?

We added the following two ratios to assess if the Company has excessive growth: 4-13 Provision for Taxes -790 -1005 -2050 -2105 8-17 Trading Ratio - Company #NAME? #NAME? #NAME? #NAME? 8-18 Trading Ratio - Industry 1.26 1.28 1.31 1.30 8-19 Net Sales to Net Worth - Company 8-20 Net Sales to Net Worth - Industry #NAME? 1.22 #NAME? 1.20 #NAME? 1.19 #NAME? 1.22

-2660 #NAME? 1.27 #NAME? 1.20

Source for Benchmark Data: Almanac of Business and Industrial Financial Ratios by Leo Troy, Prentice Hall Graphs appear below for each of the above comparisons:

Acid Ratio Comparison


0.60 0.50 0.40
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Acid Test Ratio Acid Test Ratio - Company

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atio

0.30

Acid Ratio Comparison


0.60 0.50 0.40
Acid Test Ratio - Industry Acid Test Ratio - Company

Ratio

0.30 0.20 0.10 0.00 1996 1997 1998 1999 2000

Periods

Current Ratio Comparison


1.20 1.00 0.80
Current Ratio Industry Current Ratio Company

Ratio

0.60 0.40 0.20 0.00 1996 1997 1998 1999 2000

Periods

Receivable Turnover Comparison


14.00 12.00 10.00

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Rate

Turnover Industry

Receivable Turnover Comparison


14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 1996

Turnover Rate

Receivable Turnover Industry Receivable Turnover Company

1997

1998

1999

2000

Periods

Receivable Collection Comparison


50

Days to Collect A/R

40 30 20 10 1996 1997 1998 Periods 1999 2000

Days to Collect A/R - Industry Days to Collect A/R - Company

Inventory Turnover Comparison


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7.00 6.00

Inventory

Inventory Turnover Comparison


7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 1996

Turnover Rate

Inventory Turnover Industry Inventory Turnover Company

1997

1998 Periods

1999

2000

Inventory Days Comparison


Days Held in Inventory
100 80 60 40 20 1996 1997 1998 Periods 1999 2000

Days in Inventory Industry Days in Inventory Company

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Asset Turnover Comparison


2.00

Turnover Rate

1.50 1.00 0.50 0.00 1996 1997 1998 1999 2000

Asset Turnover - Industry Asset Turnover - Company

Periods

Gross Profit Margin


70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 1996

Gross Profit Margin

Gross Profit Margin Industry Gross Profit Margin Company

1997

1998

1999

2000

Periods
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10.00% 0.00% 1996

Gros

1997

1998

1999

2000

Periods

Net Profit Margin


35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 1996

Net Profit Margin

Net Profit Margin Industry Net Profit Margin Company

1997

1998

1999

2000

Periods

Return on Total Assets


Return on Total Assets
40.00% 30.00% 20.00% 10.00% 0.00%
19 96 19 97 19 98 19 99 20 00

Return on Total Assets Industry Return on Total Assets Company

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Return on

10.00% 0.00%
19 96 19 97 19 98 19 99 20 00

Assets Company

Periods

Return on Equity Comparison


Return on Common Equity
40.00% 30.00% 20.00% 10.00% 0.00%
19 96 19 97 19 98 19 99 20 00

Return on Total Assets Industry Return on Total Assets Company

Periods

Debt to Equity Comparison


70% 60% 50% 40% 30% 20% 10% 0% 1996

Debt to Equity Ratio

Debt to Equity Industry Debt to Equity Company

1997

1998 Prepared by Matt H. Evans 06/15/2011 1999 2000

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Periods

40% 30% 20% 10% 0% 1996

Debt to Equit

Debt to Equity Company

1997

1998

1999

2000

Periods

Times Interest Earned


60 50 40 30 20 10 0 1996 1997 1998 Periods 1999 2000

Times Interest Earned

Times Interest Earned Industry Times Interest Earned Company

Trading Ratio Comparison


3.00 2.50 2.00
Trading Ratio Industry Trading Ratio Company
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Ratio

1.50 1.00 0.50 0.00

2.50 2.00

Ratio

1.50 1.00 0.50 0.00 1996 1997 1998 1999 2000

Trading Ratio Industry Trading Ratio Company

Periods

Sales to Worth Comparison


3.00 2.50 2.00
Net Sales to Net Worth Industry Net Sales to Net Worth Company

Ratio

1.50 1.00 0.50 0.00 1996 1997 1998 Periods 1999 2000

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Horizontal Analysis for X Y Z Corporation USA


Horizontal Analysis expresses change between periods as percentages for each account in the financial statements. The basic formula for horizontal analysis is: % change = (most recent period - previous period) / previous period Annual Period 1996 32.50% 29.00% 2.90% 16.50% 12.90% 3.80% Annual Period 1997 38.47% 42.42% -1.99% 4.27% 27.22% #REF! Annual Period 1998 26.77% 16.78% 5.76% 77.05% 103.98% #REF! -27.48% #NAME? #NAME? Annual Period 1999 16.67% 9.92% 3.68% 30.56% 2.68% #REF! 38.36% #NAME? #NAME? Annual Period 2000 10.93% 12.15% -0.64% 7.80% 26.37% #REF! 69.97% #NAME? #NAME?

Description Growth in Net Sales Cost of Goods Sold Growth in Gross Profits Growth in Interest Expense Growth in Income Tax Expense Growth in Non Operating Expenses Growth in Minority Interest Growth in Net Income Growth in Earnings Per Share

96.00% 1676.47% 33.50% 32.60% #NAME? #NAME?

Cash and Cash Equivalents Short Term Marketable Securities Accounts Receivable Inventory Other Current Assets Total Current Assets

3.08% 12.00% 26.70% 19.90% 26.70% 21.50%

-4.04% 50.00% 51.96% 35.32% 32.18% #REF!

-5.16% -20.00% 18.06% 21.32% 19.13% #REF!

10.77% -50.00% 22.95% 15.15% 20.44% #REF!

-12.83% 83.33% 35.11% 8.42% -7.27% #REF!

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Net Fixed Assets Longterm Investments Investments in Other Companies Intangibles and Other Assets Total Non Current Assets Growth in Total Assets Accounts Payable Short Term Borrowings Short Term Portion of LT Debt Other Current Liabilities Total Current Liabilities Longterm Debt / Borrowings Other Longterm Liabilities Total Non Current Liabilities Growth in Total Liabilities Preferred Equity Common Equity Additional Paid in Capital Retained Earnings Adj for Foreign Currency Transl Treasury Stock Growth in Total Equity (Net Worth) Sustainable Growth Rate #1 Sustainable Growth Rate #2 Growth in Market Capitalization

17.80% 24.98% 6.20% -11.11% 0.00% -100.00% 16.50% 10.00% 32.50% #REF! 1.05% 26.20% 33.50% 16.70% 12.80% 38.02% 46.00% 11.30% 37.10% 31.05% 0.00% 2.60% 1.50% 38.00% -166.00% 2.01% 6.11% #NAME? #NAME? 14.50% #REF! 53.66% 52.50% 25.00% 19.05% #REF! 50.86% 15.38% 38.12% #REF!

24.02% -62.50% #DIV/0! -4.55% #REF! #REF! 4.44% 40.98% 66.67% 18.40% #REF! 48.57% -6.53% 32.04% #REF!

23.69% 391.67% #DIV/0! 28.57% #REF! #REF! 17.63% 20.16% 20.00% 7.43% #REF! 38.46% 26.96% 36.02% #REF! #DIV/0! 1.01% 9.05% 52.95% 290.36% 2.70% #NAME? #NAME? #NAME? -6.32%

2.83% 53.39% 64.80% 44.44% #REF! #REF! 24.03% 14.52% 20.00% -18.18% #REF! 9.72% 11.80% 10.13% #REF! #DIV/0! 1.44% 0.04% 32.92% 213.09% 1.97% #NAME? #NAME? #NAME? -14.00%

#DIV/0! #DIV/0! -1.91% 3.19% -2.25% 5.29% 38.32% 39.57% -56.36% -558.33% 3.91% 1.37% #NAME? #NAME? #NAME? 24.69% #NAME? #NAME? #NAME? 29.39%

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Vertical Analysis for X Y Z Corporation USA


Vertical analysis expresses financial statements as percentages. On the Balance Sheet, Total Assets is assigned 100% and on the Income Statement, Total Revenues is assigned 100%.

Account Title Cash and Cash Equivalents Short Term Marketable Securities Accounts Receivable Inventory Other Current Assets Current Assets Net Fixed Assets Longterm Investments Investments in Other Companies Intangibles and Other Assets Non Current Assets Total Assets Accounts Payable Short Term Borrowings Short Term Portion of LT Debt Other Current Liabilities Total Current Liabilities Longterm Debt / Borrowings Other Longterm Liabilities Total NonCurrent Liabilities

Annual Period 1996 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! 77.28% #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

expressed in percentages Annual Annual Annual Period Period Period 1997 1998 1999 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! 76.47% #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! 77.59% #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! 78.86% #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Annual Period 2000 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! 77.98% #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! Page 39

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Total Liabilities Preferred Equity Common Equity Additional Paid in Capital Retained Earnings Adj for Foreign Currency Transl Treasury Stock Total Equity Total Liabilities & Equity

#REF! #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?

#REF! #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?

#REF! #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?

#REF! #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?

#REF! #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?

Total Revenues Cost of Goods Sold Gross Profit Operating Expenses Non Operating Expenses Income Before Extra Ord Items Net Income

100.00% 40.99% 58.96% 27.42% 7.51% #REF! #NAME?

100.00% 42.17% 57.78% 23.28% 6.64% #REF! #NAME?

100.00% 38.84% 61.11% 21.96% 10.79% #REF! #NAME?

100.00% 36.58% 63.36% 23.01% 9.65% #REF! #NAME?

100.00% 36.98% 62.96% 26.04% 10.80% #REF! #NAME?

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Enter Your Forecast Periods => Pro Forma Income Statement Gross Revenues Growth Assumptions Cost of Goods Sold Growth Assumptions Operating Expenses Growth Assumptions NonOperating Expenses ExtraOrdinary Items Net Income

Annual Period 2001

Annual Period 2002

Annual Period 2003

Annual Period 2004

Annual Period 2005

30,742 12.00% -12024 39.11% -7483 24.34% -3200 650 8685

34,431 12.00% -13467 39.11% -8381 24.34% -3200 650 10033

38,562 12.00% -15083 39.11% -9387 24.34% -3600 650 11143

43,190 12.00% -16893 39.11% -10513 24.34% -3600 700 12884

48,373 12.00% -18920 39.11% -11775 24.34% -4000 700 14378

Pro Forma Cash Flow Statement Sources of Operating Cash Flow: Net Income Depreciation and Amortization (Increase) Decrease Defer Taxes (Gain) Loss on Sale of Assets (Increase) Decrease Current Assets Increase (Decrease) Current Liab Operating Cash Flow Investment Sources of Cash Flow: Prepared by Matt H. Evans 06/15/2011 Page 41

8685 470 15 #REF! #REF! #REF!

10033 490 9 -996 1291 10827

11143 500 2 -1116 1446 11975

12884 520 3 -1249 1620 13777

14378 550 6 -1399 1814 15348

Enter Your Forecast Periods => Planned Sale of Assets Planned Sale of Investments Other Investment Sources to be used Total Investment Sources of Cash Planned Investments: Capital Expenditures Acquisitions in Other Co's Purchases of Investments Total Investment Applications of Cash Cash Flow from Financing Activities: Proceeds from Loans & Debt Proceeds from Minority Interest Other Financing Activities Total Financing Sources of Cash Cash Flow Applied for Financing: Payments on Loans & Debt Dividends Paid to Shareholders Purchase / Retire Stock Other Financing Activities Total Financing Applications of Cash Total Change to Cash Beginning Cash Balance Forecasted Ending Balance

Annual Period 2001 100 2200 2300

Annual Period 2002 60 2100 2160

Annual Period 2003 20 1900 1920

Annual Period 2004 25 1800 1825

Annual Period 2005 35 1700 1735

-3500 -500 -3000 -7000

-3000 -750 -3500 -7250

-3100 -1200 -4500 -8800

-2700 -650 -6000 -9350

-2600 -350 -7000 -9950

1300 20 1320

1000 60 1060

950 80 1030

750 90 840

650 100 750

-1500 -2500 -2000 -6000 #REF! 870 #REF!

-1000 -3000 -2000 -6000 797 #REF! #REF!

-600 -4000 -1500 -6100 25 #REF! #REF!

-500 -5500 -1000 -7000 92 #REF! #REF!

-500 -7000 -500 -8000 -117 #REF! #REF!

Pro Forma Balance Sheet

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Enter Your Forecast Periods => Cash and Cash Equivalents Short Term Marketable Securities Accounts Receivable Inventory Other Current Assets Total Current Assets Fixed Assets Accumulated Depreciation Net Fixed Assets Longterm Investments Investments in Other Companies Intangibles and Other Assets Total Non Current Assets Total Assets Accounts Payable Short Term Borrowings Short Term Portion of LT Debt Other Current Liabilities Total Current Liabilities Longterm Debt / Borrowings Other Longterm Liabilities Total Non Current Liabilities Total Liabilities Preferred Equity Common Equity Additional Paid in Capital

Annual Period 2001 #REF! 3074 2459 1998 #REF! 31600 -3480 28120 1705 912 200 30937 #REF! 5226 3689 30 1845 10790 3750 700 4450 15240

Annual Period 2002 #REF! 3443 2754 2238 #REF! 34600 -3970 30630 3105 1662 240 35637 #REF! 5853 4132 30 2066 12081 3750 750 4500 16581

Annual Period 2003 #REF! 3856 3085 2507 #REF! 37700 -4470 33230 5705 2862 320 42117 #REF! 6556 4627 25 2314 13522 4100 800 4900 18422

Annual Period 2004 #REF! 4319 3455 2807 #REF! 40400 -4990 35410 9905 3512 400 49227 #REF! 7342 5183 20 2591 15136 4350 800 5150 20286

Annual Period 2005 #REF! 4837 3870 3144 #REF! 43000 -5540 37460 15205 3862 650 57177 #REF! 8223 5805 15 2902 16945 4500 800 5300 22245

2200 5700

2200 5700

2200 5700

2200 5700

2200 5700 Page 43

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Enter Your Forecast Periods => Retained Earnings Adj for Foreign Currency Transl Treasury Stock Total Equity External Financing Required (EFR)

Annual Period 2001 26190 -5000 -3550 25540 #REF!

Annual Period 2002 33222 -4000 -5550 31572 #REF!

Annual Period 2003 40365 -2500 -7050 38715 #REF!

Annual Period 2004 47748 -1500 -8050 46098 #REF!

Annual Period 2005 55126 -500 -8550 53976 #REF!

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Wksh2 Wksh4 Wksh6 Wksh8 Wksh10

ProForma Financials (Linear Trend Model) X Y Z Corporation USA

A set of pro forma (forecasted) financial statements are generated using the results of the historical analysis in the previous worksheets. A statistical method known as Wksh11 active linear regression is used to predict future values. If you have important assumptions Wksh13 Wksh14 that are important to the forecast, then these assumptions should over-ride the Wksh15 Wksh16 linear calculations since we want our forecast to be as accurate as possible. Key Point => If your historical information has gradual trends, then linear regression is an appropriate model for forecasting. However, if your historical information has distinct steps up or down, then you should consider using a smoothing model .

Before we adopt a regression model, it's a good idea to generate a scatter graph of the actual data and observe if there is a clear trend for fitting a straight regression line into the data:

Total Revenues

30,000 25,000 20,000 15,000 10,000 5,000 0 1994 1996 1998 2000 2002 Periods

Total Revenues

Total Revenues

The calculation of linear values is determined by defining the slope of the line and the y intercept: Order Total Rev Linear Slope Intercept Formula for Linear Trendline: Year variable x actual y Value y m factor b factor 1996 1 12,076 12,683 3876.20 8806.60 y=(m*x)+b 1997 2 16,719 16,559 Prepared by Matt H. Evans 06/15/2011 Page 45

m: slope of line x: independent variable b: y intercept

1998 1999 2000 2001 2002 2003 2004 2005

3 4 5 6 7 8 9 10

21,196 24,737 27,448

20,435 24,311 28,188 32,064 35,940 39,816 43,692 47,569

The degree of linear fit with the actual data can be expressed as R Square 0.9888

Annual Period 2001 Pro Forma Income Statement 12-1 Gross Revenues 12-2 Cost of Goods Sold 12-3 Operating Expenses 12-4 Operating Income 12-5 Non Operating Expenses 4-25 Extra Ordinary Items Net Income 32064 -11607 -7750 12707 #REF! #NAME? #REF!

Annual Period 2002

Annual Period 2003

Annual Period 2004

Annual Period 2005

35940 -12847 -8693 14400 #REF! #NAME? #REF!

39816 -14087 -9636 16093 #REF! #NAME? #REF!

43692 -15327 -10579 17786 #REF! #NAME? #REF!

47569 -16567 -11522 19480 #REF! #NAME? #REF!

Pro Forma Cash Flow Statement Sources of Operating Cash Flow: Prepared by Matt H. Evans 06/15/2011 Page 46

Net Income Depreciation and Amortization (Increase) Decrease Defer Taxes (Gain) Loss on Sale of Assets (Increase) Decrease Current Assets Increase (Decrease) Current Liab Operating Cash Flow Investment Sources of Cash Flow: Planned Sale of Assets Planned Sale of Investments Other Investment Sources to be used Total Investment Sources of Cash Planned Investments: Capital Expenditures Acquisitions Purchases of Investments Total Investment Applications of Cash Cash Flow from Financing Activities: Proceeds from Loans & Debt Proceeds from Minority Interest Other Financing Activities Total Financing Sources of Cash Cash Flow Applied for Financing: Payments on Loans & Debt Dividends Paid to Shareholders Purchase / Retire Stock Other Financing Activities Total Financing Applications of Cash Total Change to Cash

#REF! 470 15 #REF! #REF! #REF!

#REF! 490 9 -1047 1357 #REF!

#REF! 500 2 -1047 1357 #REF!

#REF! 520 3 -1047 1357 #REF!

#REF! 550 6 -1047 1357 #REF!

100 2200 2300

60 2100 2160

20 1900 1920

25 1800 1825

35 1700 1735

-3500 -500 -3000 -7000

-3000 -750 -3500 -7250

-3100 -1200 -4500 -8800

-2700 -650 -6000 -9350

-2600 -350 -7000 -9950

1300 20 1320

1000 60 1060

950 80 1030

750 90 840

650 100 750

-1500 -2500 -2000 -6000 #REF!

-1000 -3000 -2000 -6000 #REF!

-600 -4000 -1500 -6100 #REF!

-500 -5500 -1000 -7000 #REF!

-500 -7000 -500 -8000 #REF!

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Beginning Cash Balance Forecasted Ending Balance

870 #REF!

#REF! #REF!

#REF! #REF!

#REF! #REF!

#REF! #REF!

Pro Forma Balance Sheet Cash and Cash Equivalents Short Term Marketable Securities Accounts Receivable Inventory Other Current Assets Total Current Assets Fixed Assets Accumulated Depreciation Net Fixed Assets Longterm Investments Investments in Other Companies Intangibles and Other Assets Total Non Current Assets Total Assets Accounts Payable Short Term Borrowings Short Term Portion of LT Debt Other Current Liabilities Total Current Liabilities Longterm Debt / Borrowings Other Longterm Liabilities Total Non Current Liabilities Total Liabilities Preferred Equity Prepared by Matt H. Evans 06/15/2011 Page 48 #REF! 3206 2565 2084 #REF! 31600 -3480 28120 1705 912 200 30937 #REF! 5451 3848 30 1924 11252 3750 700 4450 15702 #REF! 3594 2875 2336 #REF! 34600 -3970 30630 3105 1662 240 35637 #REF! 6110 4313 30 2156 12609 3750 750 4500 17109 #REF! 3982 3185 2588 #REF! 37700 -4470 33230 5705 2862 320 42117 #REF! 6769 4778 25 2389 13961 4100 800 4900 18861 #REF! 4369 3495 2840 #REF! 40400 -4990 35410 9905 3512 400 49227 #REF! 7428 5243 20 2622 15312 4350 800 5150 20462 #REF! 4757 3805 3092 #REF! 43000 -5540 37460 15205 3862 650 57177 #REF! 8087 5708 15 2854 16664 4500 800 5300 21964

Common Equity Additional Paid in Capital Retained Earnings Adj for Foreign Currency Transl Treasury Stock Total Equity External Financing Required (EFR)

2200 5700 #REF! -5000 -3550 #REF! #REF!

2200 5700 #REF! -4000 -5550 #REF! #REF!

2200 5700 #REF! -2500 -7050 #REF! #REF!

2200 5700 #REF! -1500 -8050 #REF! #REF!

2200 5700 #REF! -500 -8550 #REF! #REF!

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Wksh2 Wksh4 Wksh6 Wksh8 Wksh10 Wksh12 Wksh14 Wksh16

ProForma Financials (Exponential Smoothing / Weighted Moving Average) X Y Z Corporation USA


A set of pro forma (forecasted) financial statements are generated using the results of the historical analysis in the previous worksheets. A statistical method known as exponential smoothing is used to plot a trend over historical data. Additionally, we can use a weighted moving average to forecast future periods. Key Point => If you have a general upward historical trend, weighted average will tend to underestimate forecasted values and vice versa (downward trend = overestimate).

Exponential Smoothing and Weighted Moving Averages for Total Revenues: Years => 1996 1997 1998 1999 Total Revenues - Historical 12076 16719 21196 24737 Total Revenues - Exponential 12076 12076 16719 21196 Total Revenues - Wt Moving Avg 11105 15230 18890 21605 Smoothing Factor must be between 0 and 1 Set Smoothing Factor Assign weights to appropriate periods Find the Optimal Smoothing Factor: Total Exponent Revenues Amounts Difference 12076 12076 16719 12076 4643 21196 16719 4477 24737 21196 3541 27448 24737 2711 Mean Squared Error Square 21557449 20043529 12538681 7349521 12297836

2000 27448 24737 22965

2001

26070 100.00% 100.00%

1 Total weights should add up to => 1 0.00% 1.50% 4.50% 34.50% 59.50%

Find the Optimal Moving Weights: Total Weighted Revenues Amounts Difference 12076 11105 971 Prepared by Matt H. Evans 06/15/2011 Square 942841 Page 50

16719 15230 21196 18890 24737 21605 27448 22965 Mean Squared Error

1489 2306 3132 4483

2217121 5317636 9809424 20100607 7677526

Exponential Comparison
30,000 25,000

Total Revenues

20,000 15,000 10,000 5,000 2001 2002 2003 2004 2005 Periods
Annual Period 2001

Total Revenues Historical Total Revenues Exponential Total Revenues - Wt Moving Avg

Annual Period 2002

Annual Period 2003

Annual Period 2004

Annual Period 2005

Pro Forma Income Statement Gross Revenues 26070 26413 26316 26355 26340

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Cost of Goods Sold Operating Expenses Operating Income NonOperating Expenses ExtraOrdinary Items Net Income

-10197 -6346 9527 -3200 650 6977

-10207 -6226 9979 -3200 650 7429

-9860 -6229 10227 -3600 650 7277

-9694 -6464 10197 -3600 700 7297

-9740 -6859 9740 -4000 700 6440

Pro Forma Cash Flow Statement Sources of Operating Cash Flow: Net Income Depreciation and Amortization (Increase) Decrease Defer Taxes (Gain) Loss on Sale of Assets (Increase) Decrease Current Assets Increase (Decrease) Current Liab Operating Cash Flow Investment Sources of Cash Flow: Planned Sale of Assets Planned Sale of Investments Other Investment Sources to be used Total Investment Sources of Cash Planned Investments: Capital Expenditures Acquisitions Purchases of Investments Total Investment Applications of Cash

6977 470 0 15 #REF! #REF! #REF!

7429 490 0 9 -92 120 7956

7277 500 0 2 26 -34 7771

7297 520 0 3 -11 14 7824

6440 550 0 6 4 -5 6995

100 2200 2300

60 2100 2160

20 1900 1920

25 1800 1825

35 1700 1735

-3500 -500 -2000 -6000

-3000 -750 -3000 -6750

-3100 -500 -3000 -6600

-3900 -1000 -4900

-4600 -1000 -5600 Page 52

Prepared by Matt H. Evans 06/15/2011

Cash Flow from Financing Activities: Proceeds from Loans & Debt Proceeds from Minority Interest Other Financing Activities Total Financing Sources of Cash Cash Flow Applied for Financing: Payments on Loans & Debt Dividends Paid to Shareholders Purchase / Retire Stock Other Financing Activities Total Financing Applications of Cash Total Change to Cash Beginning Cash Balance Forecasted Ending Balance

1300 20 1320

2000 60 2060

3000 80 3080

4500 90 4590

7000 100 7100

-1500 -2500

-1800 -3000

-2500 -4000

-4000 -4000

-6000 -3000

-4000 #REF! 870 #REF!

-4800 626 #REF! #REF!

-6500 -329 #REF! #REF!

-8000 1339 #REF! #REF!

-9000 1230 #REF! #REF!

Pro Forma Balance Sheet Cash and Cash Equivalents Short Term Marketable Securities Accounts Receivable Inventory Other Current Assets Total Current Assets Fixed Assets Accumulated Depreciation Net Fixed Assets Longterm Investments Investments in Other Companies Intangibles and Other Assets Total Non Current Assets #REF! 2607 2086 1695 #REF! 31600 -3480 28120 705 912 75 29812 #REF! 2641 2113 1717 #REF! 34600 -3970 30630 1605 1662 100 33997 #REF! 2632 2105 1711 #REF! 37700 -4470 33230 2705 2162 150 38247 #REF! 2636 2108 1713 #REF! 41600 -4990 36610 1905 2162 150 40827 #REF! 2634 2107 1712 #REF! 46200 -5540 40660 1205 2162 100 44127 Page 53

Prepared by Matt H. Evans 06/15/2011

Total Assets Accounts Payable Short Term Borrowings Short Term Portion of LT Debt Other Current Liabilities Total Current Liabilities Longterm Debt / Borrowings Other Longterm Liabilities Total Non Current Liabilities Total Liabilities Preferred Equity Common Equity Additional Paid in Capital Retained Earnings Adj for Foreign Currency Transl Treasury Stock Total Equity External Financing Required (EFR)

#REF! 4432 3128 30 1564 9155 3750 700 4450 13605

#REF! 4490 3170 30 1585 9274 3950 750 4700 13974

#REF! 4474 3158 25 1579 9236 4450 800 5250 14486

#REF! 4480 3163 20 1581 9244 4950 800 5750 14994

#REF! 4478 3161 15 1580 9234 5950 800 6750 15984

2200 5700 17505 -5000 -1550 18855 #REF!

2200 5700 14505 -3500 -1550 17355 #REF!

2200 5700 10505 -1000 -1550 15855 #REF!

2200 5700 6505 -1550 12855 #REF!

2200 5700 3505 -1550 9855 #REF!

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2002

2003

2004

2005

26413

26316

26,355

26,340

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Wksh2 Wksh4 Wksh6 Wksh8 Wksh10

Scenario Analysis for X Y Z Corporation USA

We can copy our forecast into a new worksheet and do scenario analysis and goal-seek analysis. Although Microsoft Excel includes Scenario Manager, it can be easier and quicker to simply do our Wksh11 Wksh12 scenario analysis manually. We can use Goal Seek to find a value for a cell given a corresponding Wksh13 active formula in another cell.
Wksh15 Wksh16

Annual Period 2001

Annual Period 2002

Annual Period 2003

Annual Period 2004

Annual Period 2005

Pro Forma Income Statement (Simple Projection Method) Scenario => Non Operating Expenses will decline by $ 100,000 in year 2003 and again in year 2005: Gross Revenues Cost of Goods Sold Operating Expenses NonOperating Expenses ExtraOrdinary Items Net Income 30742 -12024 -7483 -3200 650 8,685 34431 -13467 -8381 -3200 650 10,033 38562 -15083 -9387 -3100 650 11,643 43190 -16893 -10513 -3100 700 13,384 48373 -18920 -11775 -3000 700 15,378

Instead of copying our forecast into this worksheet, we can simply do scenario analysis directly in the forecast itself. Pro Forma Income Statement (Linear Trend Method) Goal Seek => What total revenues are required if Net Income must be $ 13.5 million in Year 2004? Gross Revenues Cost of Goods Sold Operating Expenses Non Operating Expenses Extra Ordinary Items Net Income (formula cells) 32064 -11607 -7750 -3549 271 9430 35940 -12847 -8693 -4088 271 10584 39816 -14087 -9636 -4627 271 11738 44301 -15327 -10579 -5166 271 13500 47569 -16567 -11522 -5705 271 14046

Do not change formula cells (goals) to values Prepared by Matt H. Evans 06/15/2011 Page 60

when using Goal Seek (Tools > Goal Seek) This is the target cell that Goal Seek is seeking to change per the value 13,500 in cell G34

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Wksh2 Wksh4 Wksh6 Wksh8 Wksh10 Wksh12 Wksh14 Wksh16

Budget Analysis for X Y Z Corporation USA


Once we complete our forecast, we can summarize and review it before finalizing it into the form of budgets. We also need to summarize our assumptions that should go into our final budget. We can start our budget process by reviewing the different revenue forecast:

Annual Period 2001 Summarize Revenue Forecast: Simple Projection Model Linear Trend Model Wt Moving Avg Model Declining Growth Model Historical Data

Annual Period 2002

Annual Period 2003

Annual Period 2004

Annual Period 2005

30,742 32064 26070 29644 12076

34,431 35940 26413 31422 16719

38,562 39816 26316 32679 21196

43,190 43692 26355 33170 24737

48,373 47569 26340 31000 27448

Projection using declining growth rates: Gross Revenues 29644 31422 32679 33170 31000

Forecast Comparisons
60,000 50,000

40,000 30,000 20,000 10,000

Simple Projection Model Linear Trend Model Wt Moving Avg Model Declining Prepared by Matt H. Evans 06/15/2011 Growth Model Historical Data

Total Revenues

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50,000

40,000 30,000 20,000 10,000 0 2001 2002 2003 2004 2005 Periods

Model Linear Trend Model Wt Moving Avg Model Declining Growth Model Historical Data

In addition to using linear models for forecasting, we can apply several non-linear (curve) models: Logarithmic - Used when rate of change in data suddenly shifts upward or downward. Power - Used when rate of change in data occurs at a specific rate. Exponential - Used when rate of change is increasing or decreasing at ever higher rates. Polynomial - Used when rate of change fluctuates with no pattern.

Logarithmic Trend Formula for Logarithmic Trendline x factor y = ( c * LN (x)) - b LN: Natural Logarithm 1 2 3 4 5 6 7 8 9 10 Actual Predicted Values Value y 12,076 -11242 16,719 -4587 21,196 -695 24,737 2067 27,448 4210 5960 7440 8722 9853 10865 Slope Intercept c factor b factor 9600.92 11242.34

Power Trendline y = b * x^c x factor 1 Actual Predicted Values Value y 12,076 11951 Slope Intercept c factor b factor 0.52 9.39 Page 63

Total Revenues

Prepared by Matt H. Evans 06/15/2011

2 3 4 5 6 7 8 9 10 Exponential Trendline x factor y = b * EXP ( c * x ) 1 2 3 4 5 6 7 8 9 10

16,719 21,196 24,737 27,448

17109 21104 24493 27491 30212 32721 35063 37267 39356

11951.33

< - calculate using c and b factor - > Actual Predicted Values Value y 12,076 13061 16,719 16007 21,196 19618 24,737 24043 27,448 29465 36111 44256 54238 66472 81464 Slope Intercept c factor b factor 0.2 9.27 10657.5 ( c * x) 0.20339 0.40678 0.61017 0.81356 1.01695 1.22034 1.42373 1.62712 1.83051 2.03390 EXP 1.23 1.5 1.84 2.26 2.76 3.39 4.15 5.09 6.24 7.64

Polynomial Trendline y = (c2 * x^2) + (c1 * x^1) + b x factor 1 2 3 4 5 6 7 8 9 Actual Predicted Values Value y 12,076 11997 16,719 16902 21,196 21121 24,737 24654 27,448 27502 29664 31140 31930 32035 c2 -342.86 c1 5933.34 b 6406.6

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10

31454

Summarize Non Linear Curves on Graph: 1996 Logarithmic Trendline -11242 Power Trendline 11951 Exponential Trendline 13061 Polynomial Trendline 11997 Actual Revenues 12,076

1997 -4587 17109 16007 16902 16,719

1998 -695 21104 19618 21121 21,196

1999 2067 24493 24043 24654 24,737

2000 4210 27491 29465 27502 27,448

2001 5960 30212 36111 29664

2002 7440 32721 44256 31140

Non Linear Trends


100,000 80,000
Logarithmic Trendline Power Trendline Exponential Trendline Polynomial Trendline Actual Revenues

Total Revenues

60,000 40,000 20,000 (20,000)


19 1996 1997 1998 2099 2000 2001 2002 2003 2004 05

PeriodsMatt H. Evans 06/15/2011 Prepared by

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(20,000)
19 1996 1997 1998 2099 2000 2001 2002 2003 2004 05

Actual Revenues

Periods

Variance Analysis of Past Budgets: Accuracy in the budget process should be examined to determine the degree of error or variance in the budget process. If the variance is high, this indicates a need to improve planning techniques within the company. TBD: To be Determined 1996 Income Statement Items Total Revenues - Budgeted Total Revenues - Actual % difference from actual Cost of Goods Sold - Budgeted Cost of Goods Sold - Actual % difference from actual Operating Income - Budgeted Operating Income - Actual % difference from actual Net Income - Budgeted Net Income - Actual % difference from actual Balance Sheet Items Current Assets - Budgeted Current Assets - Actual % difference from actual NonCurrent Assets - Budgeted 10500 12076 -13% -4500 -4950 -9% 3100 3815 -19% 2100 #NAME? #NAME? 1997 14500 16719 -13% -6500 -7050 -8% 4900 5776 -15% 4100 #NAME? -17% 1998 22500 21196 6% -8648 -8233 5% 9000 8309 8% 6500 #NAME? 4% 1999 28500 24737 15% -9650 -9050 7% 11000 9995 10% 9000 #NAME? 14% 2000 (Wksht 16) 2001

30000 30500 27448 TBD 9% #VALUE! -11000 -11929 -10150 TBD 8% #VALUE! 10,500 11146 10150 TBD 3% #VALUE! 9300 7986 #NAME? TBD 21% #VALUE!

3450 #REF! #REF! 10900

4400 #REF! -12% 14000

6250 #REF! 8% 22000

7500 #REF! 10% 27500

7900 #REF! #REF! TBD 5% #VALUE! 29,500 31555 Page 66

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NonCurrent Assets - Actual % difference from actual Current Liabilities - Budgeted Current Liabilities - Actual % difference from actual NonCurrent Liabilities - Budgeted NonCurrent Liabilities - Actual % difference from actual Ratio Items Current Ratio - Budgeted Current Ratio - Actual % difference from actual Total Asset Turnover - Budgeted Total Asset Turnover - Actual % difference from actual Gross Profit Margin - Budgeted Gross Profit Margin - Actual % difference from actual Net Profit Margin - Budgeted Net Profit Margin - Actual % difference from actual Debt to Common Equity - Budgeted Debt to Common Equity - Actual % difference from actual Return on Equity - Budgeted Return on Equity - Actual % difference from actual

#REF! #REF! 3750 #REF! #REF! 1750 1810 -3%

#REF! -14% 5600 #REF! -10% 2450 2500 -2%

#REF! 10% 8200 #REF! 11% 3750 3301 14%

#REF! 8% 9050 #REF! 5% 4900 4490 9%

#REF! TBD 11% #VALUE! 9400 10715 #REF! TBD -3% #VALUE! 5100 5250 4945 TBD 3% #VALUE!

1 #REF! #REF! 0.68 #REF! #REF! 60% 59% 2% 19% #NAME? #NAME? 0.45 1 -11% 20% 24% -16%

1 #REF! -2% 0.72 #REF! -8% 60% 58% 4% 25% #NAME? -16% 0.50 1 -20% 29% 33% -13%

1 #REF! -2% 0.80 #REF! -3% 60% 61% -2% 28% #NAME? -5% 0.60 1 -4% 32% 35% -9%

1 #REF! 5% 0.80 #REF! 4% 60% 63% -5% 30% #NAME? -6% 0.65 1 13% 35% 33% 5%

0.80 #REF! #REF! TBD 3% #VALUE! 0.79 #REF! #REF! TBD -2% #VALUE! 60% 1 63% TBD -5% #VALUE! 28% 26% #NAME? TBD 0% #VALUE! 0.55 #REF! 1 TBD 4% #VALUE! 30% #REF! 26% TBD 16% #VALUE!

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We can use specific measurements to track and control forecasting errors: Mean Absolute Error - An absolute value of forecast errors, does not place weight on the amount of the error. Calculated as the sum of (actual values - predicted values) / n. Mean Square Error - Similar to Mean Absolute Error, but does place more emphasis on the amount of error; i.e. an error of 8 is twice as significant as 4. Calculated as the sum of (actual values - predicted values)^2 / n. Root Mean Square Error - To make the Mean Square Error useful and comparable to the Mean Absolute Error, we can take the square root of the Mean Square Error. We can then use this as a guide to establish an error limit or standard for flagging unacceptable errors. Is Error Actual Forecasted Error Outside Example: Total Revenues Period Revenues Revenues Error Absolute Squared Limit? n: total number of periods 1996 12076 10500 1576 1576 2483776 No 1997 16719 14500 2219 2219 4923961 Yes 1998 21196 22500 -1304 1304 1700416 No 1999 24737 28500 -3763 3763 14160169 Yes 2000 27448 30000 -2552 2552 6512704 Yes n => 5 Sum => -3824 3824 14622976 Yes Mean Absolute Error Mean Square Error Root Mean Sqr Error Establish Error Limits 765 2924595 1,710 1,710

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e using c and b factor - > Predicted Value y 13061 16007 19618 24043 29465 36111 44256 54238 66472 81464

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2003 8722 35063 54238 31930

2004 9853 37267 66472 32035

2005 10865 39356 81464 31454

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Home Wksh3 Wksh5 Wksh7 Wksh9 Wksh11 Wksh13 Wksh15

Wksh2 Wksh4 Wksh6 Wksh8 Wksh10 Wksh12 Wksh14 active

Final Budgets for X Y Z Corporation USA


Now that we have analyzed our historical data and placed it into a set of forecast, we can pull it all together with our assumptions for a final budget. Many of these assumptions should be included in our forecast for improved accuracy. However, we need to fine tune and finalize all assumptions so that we can produce a final finished budget for planning purposes. Budget Period 2001 Operating Plan

Ref

Assumptions & Comments

16-1 16-2 16-3 16-4 16-5 16-6 16-7 16-8 16-9 16-10

Total Revenues Cost of Goods Sold Operating Expenses Operating Income Interest Expenses Income Taxes Other Non Operating Expenses Earnings Before Extra Ord Items Extra Ordinary Items Net Income Financial Plan Budgeted Cash Flows

30500 -11929 -7424 11146 -310 -3300 -200 7336 650 7986

Based on review of Pro Forma Financials, Marketing, etc. Volume projections, production budgets, and vertical analysis Average % of Sales per Vertical Analysis

Based on anticipated levels of debt and past history Based on anticipated taxable income and effective rate Provision for contingency was added on this line item

Per our Simple Model Forecast

16-11 16-12 16-13

Net Income Depreciation and Amortization (Increase) Decrease Defer Taxes

7986 470

Review of Simple Model Forecast and Capital Expenditure Budget

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16-14 16-15 16-16 16-17

(Gain) Loss on Sale of Assets (Increase) Decrease Current Assets (Increase) Decrease Current Liab Operating Cash Flow Investment Sources of Cash: Planned Sale of Assets Planned Sale of Investments Other Investment Sources to be used Total Investment Sources of Cash Planned Investments: Capital Expenditures Acquisitions in Other Co's Purchases of Investments Total Investment Applications of Cash Cash Flow from Financing Activities Proceeds from Loans & Debt Proceeds from Minority Interest Other Financing Activities Total Financing Sources of Cash Cash Flow Applied for Financing: Payments on Loans and Debt Dividends Paid to Shareholders Purchase / Retire Stock Other Financing Activities Total Financing Applications of Cash Total Change to Cash Beginning Cash Balance Forecasted Ending Balance

15 #REF! #REF! #REF!

Per Simple Forecast Model Same formula as used in forecast models Same formula as used in forecast models

16-18 16-19 16-20 16-21

100 2200 2300

Per Simple Model Forecast Per Simple Model Forecast

16-22 16-23 16-24 16-25

-4500 -350 -2500 -7350

Budgeted $ 4.5 million in Capital Expenditure Budget Per forecast, strategic plan, and other budgets Per forecast, strategic plan, and other budgets

16-26 16-27 16-28 16-29

1450 15 1465

Per Financing Requirements and other budgets Per historical financials and investment budget

16-30 16-31 16-32 16-33 16-34 16-35 16-36 16-37

-1250 -2500 -1500 -5250 #REF! 870 #REF!

Per forecast and other budgets Per Simple Model Forecast Per strategic plan and other budgets

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Budgeted Balance Sheet 16-38 16-39 16-40 16-41 16-42 16-43 16-44 16-45 16-46 16-47 16-48 16-49 16-50 16-51 16-52 16-53 16-54 16-55 16-56 16-57 16-58 16-59 16-60 16-61 16-62 16-63 16-64 16-65 Cash and Cash Equivalents Short Term Marketable Securities Accounts Receivable Inventory Other Current Assets Total Current Assets Fixed Assets Accumulated Depreciation Net Fixed Assets Longterm Investments Investments in Other Companies Intangibles and Other Assets Total Non Current Assets Total Assets Accounts Payable Short Term Borrowings Short Term Portion of LT Debt Other Current Liabilities Total Current Liabilities Longterm Debt / Borrowings Other Longterm Liabilities Total Non Current Liabilities Total Liabilities Preferred Stock Common Equity Additional Paid in Capital Retained Earnings Adj for Foreign Currency Translation #REF! 10 3050 2440 1983 #REF! 32600 -3480 29120 1205 1000 230 31555 #REF! 5185 3660 40 1830 10715 4150 1100 5250 15965 Same formula as used in forecast models Same formula as used in forecast models Per review of forecast and historical information Same formula as used in forecast models Per above Per historical financials Same formula as used in forecast models Same formula as used in forecast models Same formula as used in forecast models

Same formula as used in forecast models Same formula as used in forecast models Same formula as used in forecast models Per review of forecast and strategic plans Per review of forecast and historical balances

Same formula as used in forecast models Per review of historical information and expected growth rates.

2200 5700 25491 -5000

Per Simple Model Forecast Per Simple Model Forecast Same formula as used in forecast models Per Simple Model Forecast Page 78

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16-66 16-67 16-68 16-69

Treasury Stock Total Equity Total Liabilities and Equity External Financing Required

-3050 25341 41306 #REF!

Same formula as used in forecast models

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enditure Budget

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Microsoft Excel 9.0 Answer Report Worksheet: [Detail_Analysis.xls]13 - Pro Forma (Exp) Report Created: 3/16/2002 3:42:28 PM

Target Cell (Min) Cell Name $G$60 Mean Squared Error Square

Original Value Final Value 20525549 12297836

Adjustable Cells Cell Name $D$24 Set Smoothing Factor

Original Value Final Value 1 1

Constraints Cell Name Cell Value Formula Status Slack $D$23 Smoothing Factor must be between 0 and 1 $D$23>=$D$23 Binding $D$24 Set Smoothing Factor 1 $D$24<=$E$23Binding 0

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Microsoft Excel 9.0 Answer Report Worksheet: [Detail_Analysis.xls]13 - Pro Forma (Exp) Report Created: 3/16/2002 5:19:05 PM

Target Cell (Min) Cell Name $G$46 Mean Squared Error Square

Original Value Final Value 65536151 59853342

Adjustable Cells Cell Name Original Value Final Value $D$25 Assign weights to appropriate periods 0.00% 0.00% $E$25 Assign weights to appropriate periods 2.00% 1.50% $F$25 Assign weights to appropriate periods Total weights should add up to => 5.00% 4.50% $G$25 Assign weights to appropriate periods 35.00% 34.50% $H$25 Assign weights to appropriate periods 60.00% 59.50%

Constraints Cell Name Cell Value Formula Status $I$25 Assign weights to appropriate periods 100.00% $I$25=$E$23 Binding $D$25 Assign weights to appropriate periods 0.00% $D$25<=$E$23Not Binding $E$25 Assign weights to appropriate periods 1.50% $E$25<=$E$23Not Binding $F$25 Assign weights to appropriate periods Total weights should add up to => 4.50% $F$25<=$E$23Not Binding $G$25 Assign weights to appropriate periods 34.50% $G$25<=$E$23Not Binding $H$25 Assign weights to appropriate periods 59.50% $H$25<=$E$23Not Binding $D$25 Assign weights to appropriate periods 0.00% $D$25>=$D$23Binding $E$25 Assign weights to appropriate periods 1.50% $E$25>=$D$23Not Binding $F$25 Assign weights to appropriate periods Total weights should add up to => 4.50% $F$25>=$D$23Not Binding $G$25 Assign weights to appropriate periods 34.50% $G$25>=$D$23 Not Binding $H$25 Assign weights to appropriate periods 59.50% $H$25>=$D$23Not Binding

Slack 0 1 0.99 0.96 0.66 0.41 0.00% 1.50% 4.50% ### ###

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