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10.3 Forecasts, Proformas
and the December 31 Cash Position


On the proforma income statement, sales revenue for each product is based on its price multiplied by the lesser of either:

  • The Your Sales Forecast entry (or, if none is entered, the Benchmark Prediction); or
  • The total number of units available for sale (that is, the Production Schedule added to Inventory).

When a forecast is less than the total number of units available for sale, the proforma income statement will display an inventory carrying cost. When a forecast is equal to or greater than the number of units available, which predicts every unit will be sold, the carrying cost will be zero.

The simulation charges a 12% inventory carrying cost.

On the proforma balance sheet, under current assets, inventory reflects the dollar value of all unsold units. Cash reflects the amount left after all company payments are subtracted from the sum of:

  • Total sales revenue reported on the proforma income statement; and
  • Stock, current debt and long term debt entries in the Finance area.

The proforma balance sheet’s cash position also displays as the Finance spreadsheet’s December 31 Cash Position. Therefore, unrealistically high forecasts or prices will create cash predictions that are not likely to come true.

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