Module 12: Critical Thinking Assignment

Financial Forecasting (120 points)

There are two parts to this assignment.

Part 1:
In this assignment, you will conduct a financial forecast for a healthcare organization’s external funding. After you conduct that forecast, you will discuss the learning concepts from the module.

ABC Company is a small manufacturer of ultrasound equipment. The Year 1 financial statements for the firm are shown below:

Balance Sheet as of December 31, Year 1 (thousands of SAR)

Cash	90,000
Receivables	180,000
Inventories	360,000
Total current assets	630,000
Net fixed assets	720,000
Total assets	1,350,000

 

Accounts payable	180,000
Notes payable	78,000
Accruals	90,000
Total current liabilities	348,000

 

Common stock	900,000
Retained earnings	102,000
Total liabilities & equity	1,350,000

 

Income Statement for Year 1 (thousands of SAR)

Sales	1,800,000
Operating costs	1,639,860

 

Earnings before interest and taxes	160,140
Interest	10,140
Earnings before taxes	150,000
Taxes (20%)	30,000
Net income	120,000
Dividends (60%)	72,000
Addition to retained earnings	48,000

 

Suppose that in Year 2, sales only increase by 8 percent over Year 1 sales. Construct the pro forma financial statements using the constant growth method. Assume the firm operated at full capacity in Year 1. What will be the external funding requirement?

Part 2:
How does trend analysis help in the forecasting revenue, expenses and profit on the Profit and Loss Statement for an organization? Explain whether forecasting difficulties depend on the type of healthcare organization, such as a hospital or an outpatient clinic. Additionally, explain what impact a growing population within the Kingdom of Saudi Arabia will have on the ability to forecast utilization of assets (on the Balance Sheet) effectively.

Express the financial concepts of this course such as revenue payment methods, financial risk, debt, equity, capital acquisition, financial forecasting, and the revenue cycle.

Your paper should meet the following structural requirements:

· The paper should be 6-8 pages in length, not including the cover sheet and reference page.

· You must show all your calculations for credit. Your calculations for this assignment must be submitted as an Excel file, identified as Appendix A, and included as part of the Word document submission.

· Format the paper according to APA and Saudi Electronic University writing standards.

· Provide support for your statements with in-text citations from a minimum of two scholarly articles.

· Three of these sources may be from the class readings and the textbook, but three must be external and come from peer-reviewed journals.

· The Saudi Digital Library is a good place to find these references.