Shannan Doss and Gabriela Santos
Week 2 – Discussion Forum 1
Guided Response: Review the posts from your classmates and respond to at least two. Compare and contrast the points you and your classmates made regarding the importance of preparing a sales projection in the process of financial forecasting. Each response should have a minimum of 100 words.
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines
Order Paper Now
On this Document there two classmates with discussion that needs to be response. Shannan Doss and Gabriela Santos
Shannan Doss
Hello Class,
When organization want to project where they want to go, they prepare a pro forma financial statement. This statement along with the cash statement and that balance sheet, allows a company to estimate their future expenses and possible profits that they will gain. There are four steps that are used when developing a pro forma income statement; establishing a sales projection, determine a production schedule, computing other expenses and determining profit by completing the actual pro forma statement, (Block, Hirt, & Danielsen, 2019, p.98).
The first step in developing a pro forma income is critical because, to have a meaningful and correct sales projection allows the company to have an appropriate amount of inventory in order to predict any future profits. It predicts the company’s anticipated needs by assessing the past and current sales results. The sales projection is measured in how many units are in inventory and by the selling price per unit. “It is important for financial managers to realize that projections are often inherently risky” (Block, Hirt, & Danielsen, 2019, p.99).
Based on Deere’s Second-Quarter Reports, it states that the company’s net sales and revenues are projected to rise 5% to $10.3 billion. By the end of the second quarter, the company reported a net income of $1.135 billion or $3.52 per share, which had risen from the prior year’s net income of $1.208 billion. Results were favorable for the company in 2018, however due to the discrete adjustments to the provision for income taxes, the company was unfavorable affected by an $803 million tax reform. The equipment operating sales and profit net sales were increased by 3%. The Agriculture & Turf sales’ numbers for the quarters were higher due to the higher shipment price and volumes. The operations profits declined as well due to the higher production costs. The company will need to adopt more of a financial outlook for the agricultural sector.
Shannan D.
Reference:
Block, S. Hirt, G. A., & Danielson, B. R. (2019). Foundations of financial management (17th edition) Retrieved from https://www.vitalsource.com/ (Links to an external site.) (Links to an external site.)
John Deere. (n.d.). Investor relations (Links to an external site.) (Links to an external site.). Retrieved from https://investor.deere.com
Gabriela Santos
The pro forma income statement is important because it is a great way to guide a company into the future. The first step to preparing a pro forma income statement is building a sales projection. Based on the sales projection, the rest of the statement comes together (Block, Hirt, & Danielson, 2019).
The sales projections are essential because they carry a lot of weight for a company. The textbook warns that marketing teams can promote optimistic sales projections that may not be met based on current events. External forces, like gas prices, can affect a business positively or negatively. When sales projections are not met, it can negatively impact the company’s stock. It’s advised that a good financial officer will evaluate how risky sales projections are. It’s also a good practice to consider worst-case scenarios so a company is prepared just in case (Block, Hirt, & Danielson, 2019).
Deere & Company shares its sales results within the context and explain their numbers with text. While some of the numbers show an increase in net sales, due to currency translation it actually turns in to a negative downward trend from year-to-date. They also make sure to show how gains and losses are offset by other forces.
Issues that Deere faces is its flattening sales or declining sales in several markets like in Asia. They also cite current currency exchange rates as a problem for them. They share that their projections are cautious due to the agricultural industry. As a response, they are being strategic with inventory. Overall, Deere is still optimistic about the future and hope with a new plan they will be successful.
Resources:
Block, S. B., Hirt, G. A., & Danielson, B. R. (2019). Foundations of financial management (17th ed.). Retrieved from https://www.vitalsource.com/
John Deere. (n.d.). Investor relations (Links to an external site.). Retrieved from https://investor.deere.com
