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

The balance sheet forecast for 1, 2 or 3 years defines solvency and liquidity. It is created from your own figures for sales, overheads finance and so on.

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)

63,022136,326325,341
    
Net Assets105,768186,311391,483
    
Capital5,0005,0005,000
    

Retained Profits Bfwd

20,000100,768181,311

add: Profit / Loss after Tax

80,76880,543205,172

less: Dividend

000

Retained Profits C/Fwd

100,768181,311386,483
    

Capital and Reserves (Equity)

105,768186,311391,483

How to Read the Balance Sheet Forecast

This balance sheet forecast is produced from your own figures for sales, profits, margin and so on plus a few simple ratios. More than a simple summary of assets and liabilities, it describes the predicted financial condition of your business.

The two main elements are net current assets known as working capital, defining financial liquidity and equity / net assets, which should (but not always) define solvency. Working capital is the sole source of projected day-to-day cash flow which is why your projected expenditure on overheads and investments, especially for fixed assets must be planned with care..

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.

As these describe working capital (also known as liquidity) they are the most important component of any balance sheet.

The value of working capital tells you and others (for example the bank) how well your business plan is expected to generate sufficient cash in order to support its operations for the year or years ahead. For that reason forcasting a deficit is always cause for concern.

What Does a Balance Sheet Balance Against?

As this example of a balance sheet forecast 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.

While a positive balance sheet indicates appears to indicate solvency 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.

.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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