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

This example shows how Figurewizard calculates your balance sheet forecast. Liquidity, solvency and operating cash flow all derive from the balance sheet.

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 Liabilities154,652125,407181,003
 Long Term Liabilities13,8784,09511,648
 Total Liabilities168,530129,502192,651
    
 

Net Current Assets (Working Capital)

63,022136,326325,747
    
 Net Assets105,768186,311391,890
    
 Capital5,0005,0005,000
    
 

Retained Profits Bfwd

20,000100,768181,311
 

add: Profit / Loss after Tax

80,76880,543205,578
 

less: Dividend

000
 

Retained Profits C/Fwd

100,768181,311386,890
    
 

Capital and Reserves (Equity)

105,768186,311391,890

How to Read the Balance Sheet Forecast

The balance sheet that Figurewizard produces is arguably the most important forecast of all, describing as it does the future financial condition of your business. Solvency, liquidity and operating cash flows are all derived from it.

The balance sheet's two most important numbers are for equity; forecasting balance sheet solvency and working capital forecasting liquidity. Of the two, working capital will always outrank equity in importance.

What is Working Capital

Assets that are concerned exclsuively with core tading activity (operations) that are cash convertible within twelve months are termed to be current assets. Apart for cash itself these include accounts receivable, stock and prepayments.

Current liabilities represents all debt deemed to payable within twelve months, whether concerned with core trading or not. The difference between these two (net current assets) is the definition for working capital.

Planning Overheads and the Balance Sheet

The What-If Calculator and Planner makes it possible for you to update / change forecasts in real time. Here it has been used to improve working capital and cash by reducing forecast wages and fixed overheads - Each by increments of 5%

Year 1 less 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


While working capital deficits can be covered by increased borrowings they will only ever buy you time: Whether long or short term, loans do not cure insolvency.

Planning Fixed Assets and Overheads

Improved working capital and cash flow also rely on sustainable expenditure for investment in new fixed assets. Their cost, regardless of financing will always affect balance sheet liquidity.

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 haave 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 liquiity 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


No comfort can be taken from the fact that the acquisition of fixed assets might be supported by asset finance. While fixed assets do not figure in working capital, repayments plus residual short term debt (payable within one year) deplete it.

Paying Current Liabilities on Time

Resolving cash flow problems by delaying payments for current liabilities only makes a bad situation worse.

Financial penalties for late payment of taxes are bad enough but the inevitable loss of confidence in your business that goes with late payment to suppliers will be worse still by putting commercial credit and therefore operating cash flows at risk.

Fixed Assets and Depreciation

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.

This is an important distinction. Depreciated net book values for fixed assets are invariably significantly lower than what could reasonably be expected to be realised if put up for sale. In the event of a forced sale (which is how bank managers will view their value) that realisable value will be lower still.

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

Producing 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 simple cash ratios.

Plan to Avoid Business Failure Using Figurewizard

With your first attempt at forecasting with Figurewizard there are likely to be areas of profit, cash, and balance sheet value that you will want to change. This is what the What-If Calculator and Planner is for.

For example it allows you to address deficits for profits, working capital and cash flow by amending your original figures such as profit margin, overheads, year-end stock, investments and financing , all with single clicks of the mouse. 

As you do so, the calculator, which displays the key features of your forecasts such as operating profits, profit after tax, cash flow, bank balances, working capital and net worth all change too, again in real time.

What-If Calculator and Factoring / Supply Chain Financing

You can also use the What-If Calculator to select factoring / supply chain financing.  Once again all this takes are single clicks to select the percentage of invoicing to be factored and the rate of interest to be charged. Once more as yo do so, everything changes in real time.

Subscribing to Figurewizard costs just £20 a year with no extra charges.

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