Essay: Financial Forecasting and Growth Rates

Sample Essay

The financial statements of Micro Chip Computer Corporation have been used to calculate the year to year percentage growth rate in net sales. The growth rates have been calculated using an Excel Spreadsheet. The rates have been calculated by taking the difference between sales of two years and dividing the result by the first year. The growth rate for 2004-2005 is calculated by deducting $11,062 from $11,933 and dividing the difference $871 by $11,062 to arrive at a growth rate of 7.87%. The same method has been applied for calculating the growth rate of 2005-2006 which is -23.06%. The growth rate for 2006-2007 is -33.11% and for 2007-2008 it is 35.71%. Mathematically this formula is shown as:

Percentage growth in net sales = (Current year sales – Previous year sales) / Previous year sales

Fiscal Years	2004	2005	2006	2007	2008
Net Sales	$11,062	$11,933	$9,181	$6,141	$8,334
Growth Rates		7.87%	-23.06%	-33.11%	35.71%

Excel Formulas

	A	B	C	D	E	F
1	Fiscal Years	2004	2005	2006	2007	2008
2	Net Sales	11062	11933	9181	6141	8334
3	Growth Rates		=(C2-B2)/B2	=(D2-C2)/C2	=(E2-D2)/D2	=(F2-E2)/E2

2.

The target revenue for 2009 of the firm can be calculated by adding the 10% growth rate to the 2008 sales amount.

2009 Revenue Target = 8,334 + (8,334 X 10%)

2009 Revenue Target = 8,334 + 833.4

2009 Revenue Target = $9,167.4

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