From the course: Financial Accounting Part 2

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Forecasted income statement

Forecasted income statement

From the course: Financial Accounting Part 2

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Forecasted income statement

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- So let's start with the forecasted income statement. Sales are forecasted to go up by 20%. Sales in year one were $1,000. If they're going to go up by 20%, they're going to go up to $1,200. That's our starting point. Now, I should stop here for just a moment. Please realize that the most difficult part of this whole exercise that we're going to do is right here, getting the sales forecast. How much are our sales going to go up? What's going to happen in our market next year? What are our competitors going to do? What's going to happen in the overall economy? All these complex factors need to come into this estimate of the sales increase. Now, if my sales go by 20%, what should happen to my cost of good sold? Just naturally, I don't need to make any wild assumptions here. If I sell 20% more stuff, then I'm going to probably have to buy 20% more stuff from my suppliers. My cost of good sold should go up by 20%.…

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