Income Statement forecast for next three years for Walgreens along with a balance sheet forecast.
explain the Liquidity issues based off of quick ratio, current ratio, operating cash flow/ current liabilities, days in receivable for Account receivable, account payable turnover,working capital and days inventory turnover from walgreens latest financial statement.
Also look at the stage of life of walgreens are they paying dividends, purchasing treasuring, high debt, pay less in advertising or cash flow from operations is greater than net income.
When forecasting the income statement, please look into cost of goods sold, is it increasing due to material prices, sales cost, demand for product, variable or fix cost, gross margins
How does walgreens compare to its competitors
Financial leverage, coverage ratio
Change in earnings
Return on asset
Does the company have any solvency problems is the company profitable
Use you use chart but cite them
and lastly NOOOO professional analyis work can be used this is based off of personal analyis work
II. A description of the industry and how your firm competes within that industry.
(There are industry reports available through Armacost Library. Access described at the end of this document. Other sources can be used as well. Be sure to cite the sources that you use.)
A. Many of the larger companies participate in more than one industry, or have different segments with revenue from each industry. Develop and communicate your accurate understanding of the industry(ies) in which your firm competes.
B. Explain how the industry(ies) provide(s) value to customers.
C. Describe how the company achieves market share within its industry(ies). What is the firm’s strategy to beat the competition to supply value to customers/clients? How has this strategy paid off in terms of firm revenue relative to the revenue of competitors? How does the growth/decline of your firm’s revenue compare to that of competitors?
D. Are there disruptive shifts affecting the industry, such that future value creation for customers will have to be different from past value creation? Which changes are inevitable? Which changes are likely? How will the terms of competition be disrupted?
III. Analyze the Financial Statements and notes for clues about why your firm performed as it did in the past.
A. Reconfigure the comparative balance sheets and income statements into operating and non-operating (financing) sections. Provide an explanation for the categorization of any items that are not obvious. [For instance, sales and cost of goods sold are obviously operating; “Other” or “Investments” could require a decision on your part. I need to be able to see your thinking whenever your judgment has come into play.]
B. Assess profitability. What do the financial statements tell you about how the firm has achieved its gross margin? It’s profit margin? Have there been recent changes in profit margin? Why? Or why not?
C. Use the balance sheet in conjunction with the income statement (and of course, footnotes) to help you understand any changes in costs. Have there been shifts in the mix of fixed and variable costs? Can you see changes in the market cost of inputs over time? Did your firm just absorb these changes in costs, or did it do something to minimize the impact of higher costs or take advantage of lower costs?
D. Use the balance sheet and the statement of cash flows to understand how your firm has maintained or reconfigured its investments on long-term productive assets to adjust to changing factors of competition. Further, are there sources of value that your firm has developed through past expenditures that do not appear on the balance sheet? Will these sources of value require ongoing expenditures?
E. Evaluate the financing of the firm. In particular, evaluate return on equity using return on operating assets adjusted for leverage times spread. Does the firm have financial assets, and are these being used efficiently? Does the firm’s use of debt financing benefit equity providers? Is this benefit sustainable?
F. You will use your risk assessments later to adjust discount rates that you apply to forecasted earnings and cash flows. At this point, use financial statements and footnotes (Off-Balance Sheet Obligations) to assess risk. Does debt financing create an unsustainable level of solvency risk? Is liquidity a problem? Include scheduled cash payments that are only disclosed in the footnotes when you assess liquidity.
IV. Forecasting the income statement and the balance sheet
A. Develop specific sales forecasts for the next three fiscal years (2018, 2019, 2020), and a continuing (horizon) forecast for years 2021 and on. You should use industry and analyst reports in conjunction with your own insights. Cite your sources and explain the thought process you used to arrive at the forecast you will use.
B. Forecast operating income (expenses associated with your revenue forecasts). Use your discretion concerning the amount of detail that is useful and estimable. Clearly indicate your judgments regarding persistent and transitory income items. (Some expenses cannot be forecast until you have forecast net operating assets—e.g., depreciation.)
C. Forecast future net operating assets (operating assets less operating liabilities) necessary to support the sales forecasts. Use a level of details that allows you to include as much reliable information as is available to you, and stops short of just making stuff up. Use historic turnover ratios (Sales/_______) where you have reason to believe the ratio will continue at current levels, and adjust future turnover where you believe future assets levels needed to support sales will change. Remember to consider sources of value that do not appear on the firm’s balance sheet.
D. Forecast free cash flow, cash flow from operations less net cash used to invest in operating assets.
E. Forecast the financing of the firm. What will the firm do with free cash flow, or cover cash flow deficits? You will need to decide on future debt levels. Can or should the firm maintain its current financial leverage? What will be the future cash dividend/common share repurchase policy?
