This is a Working Example of our Forecasts
Registered users can produce their own business forecasts in minutes; exactly as is shown here.

Report name: Sample Forecast

How the Balance Sheet Forecast is Calculated

Not just a list of assets and liabilities a balance sheet defines a company’s financial position. Liquidity, gearing and solvency are all derived from it.

forecast for year beginning the 1st.May 2017May 2018May 2019
Fixed Assets56,62454,08177,791
Current Assets217,675261,733506,750
Total Assets274,298315,813584,540
Current Liabilities154,652125,407181,409
Long Term Liabilities13,8784,09511,648
Total Liabilities168,530129,502193,057

Net Current Assets (Working Capital)

Net Assets105,768186,311391,483

Retained Profits Bfwd


add: Profit / Loss after Tax


less: Dividend


Retained Profits C/Fwd


Capital and Reserves (Equity)


How to Read the Balance Sheet Forecast

Out of all the forecasts supporting a business plan, it is the balance sheet that answers all of the questions concerning forecast liquidity and solvency.

That makes it more than a simple list of assets and liabilities. This one is produced from nothing more than your own figures for sales, gross profit margin, overheads, bank overdraft, other loans and so on plus a few simple ratios.

Its two main elements are net current assets. also known as working capital, defining financial liquidity plus equity / net assets, which should (but not always does) define solvency. As working capital tells you and others (for example the bank) how well you expect your business plan to generate enough cash to support your core trading operations for the year or years ahead, a working capital forecast in deficit is never acceptable.

Forecast Working Capital and Liquidity.

"Net current" refers to core trading assets such as cash itself, accounts receivable and stock that can reasonably be expected to be turned into cash within a year less debt scheduled to be paid within a year.

That is working capital the principal component of any balance sheet forecast.

It tells you and others (for example the bank) how well your business plan will be generating cash to support its core trading operations for the year or years ahead, which is why working capital deficits must always be corrected.

What Does a Balance Sheet Balance Against?

As this example illustrates, equity represents paid up capital plus retained profits after tax. That in turn describes how the assets less liabilities (net assets) of the business are financed.

Positive balance sheet net assets / equity might appear to indicate solvency but that is not actually always the case. More often than not, a "fair value" for fixed assets (were they to be put up for sale) is usually lower than their net book value, meaning that that net assets are often overstated in realiseable cash terms. This is described next.

Fixed Assets in the Balance Sheet

Cost less depreciation describes the net book value of fixed assets in the balance sheet. That represents the residual value of their forecast working life in the business, not their estimated fair market values.

That is an important distinction. Depreciated net book values for fixed assets are almost always significantly lower than what they could be expected to fetch if put up for sale. In the event of a forced sale (which is how bank managers will assess their value) those prices will be lower still.

Fixed assets play no part in defining liquidity other than depleting it upon their acquisition; regardless of asset financing.

Planning Overheads and Balance Sheet Liquidity

The What-If Calculator and Planner gives you the opportunity to update / change forecasts in real time. Here it is used to improve working capital and cash by reducing forecast wages and fixed overheads - Each by increments of 5%

Year 1 less Fixed O/Heads & Wages Pre-Tax Profit Equity Working Capital Increase / Decrease Borrowings Bank Year End
0% 430,000 94,381 105,052 59,993 53,854 -35,439
5% 408,500 116,779 123,911 81,165 33,488 -13,261
10% 387,000 138,712 141,677 98,931 9,962 8,452

Planning - Fixed Assets and Overheads

Improved working capital and cash flow are also affected by investment in new fixed assets. Their cost plus any new debt associated with financing always reduces balance sheet liquidity.

For example, in this sample forecast £30,000 of new main pool assets (e.g. plant and machinery, fixtures, equipment, trucks and vans) and £25,000 for company cars have been entered, a total of £55,000. Seventy percent of that is financed over 24 months.

The table below shows how that £55,000 will affect liquidity (working capital) and cash flows, followed by what happens to these if first the £25,000 for new cars is removed followed by the £30,000 of new main pool assets.

Despite these assets being 70% financed, the liquidity and cash flow improvements are significant.

Fixed Asset Acquisitions Fixed Overheads Interest Charges Equity Working Capital   Increase / Decrease Borrowings Bank Year End
55,000 430,000 5,062 105,052 59,993 53,854 -35,439
30,000 408,500 3,104 127,097 100,956 5,616 -691
0 387,000 1,488 143,371 135,789 -48,780 69,719

How to Produce this Balance Sheet Forecast

No intervention by a user is called for to calculate this balance sheet forecast. Figurewizard will automatically produce it just from your forecast sales, margins, overheads, investment and a few simple cash ratios.

VAT and corporation tax .are automatically calculated and applied to the forecasts and the calculator / planners by the system. As with everything else, intervention on your part is not called for.

Borrowings and Solvency

Your business plan should always be angled towards making sure that your business iwill be generating enough cash to finance costs associated with core trading.

That means working towards positive working capital and operating cash flow..

How Much Does Figurewizard Cost

Subscribing to Figurewizard costs just £30 a year. There are no extra charges.

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