Pro Forma Income Statement


Because marketing managers are accountable for the profit impact of their actions, they must translate their strategies and tactics into pro forma, or projected, income statements. A pro forma income statement displays projected revenues, budgeted expenses, and estimated net profit for an organization, product, or service during a specific planning period, usually a year. Pro forma income statements include a sales forecast and a listing of variable and fixed costs that can be programmed or committed.

Pro forma income statements can be prepared in different ways and reflect varying levels of specificity. They have a typical layout consisting of six major categories or line items:

  1. Sales—forecasted unit volume times unit selling price
  2. Cost of goods sold—costs incurred in buying or producing products and services. Generally speaking, these costs are constant per unit within certain volume ranges and vary with total unit volume.
  3. Gross margin (sometimes called gross profit)—represents the remainder after cost of goods sold has been subtracted from sales.
  4. Marketing expenses—generally programmed expenses budgeted to produce sales. Advertising expenses are typically fixed. Sales expenses can be fixed, such as a salesperson’s salary, or variable, such as sales commissions. Freight or delivery expenses are typically constant per unit and vary with total unit volume.
  5. General and administrative expenses—generally, committed fixed costs for the planning period, which cannot be avoided if the organization is to operate. These costs are frequently called overhead.
  6. Net income before (income) taxes (often called net profit before taxes—the remainder after all costs have been subtracted from sales.

A pro forma income statement reflects a marketing manager’s expectations (sales) given criterion inputs (costs). This means that a manager must think specifically about customer response to strategies and tactics and focus attention on the organization’s financial objectives of profitability and growth when preparing a pro forma income statement.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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The Strategic Window


Strategic window is the limited period during which the key requirements of a market and the particular competencies of a firm best fit together. The view to the strategic window shows planners a way to relate potential opportunities to company capabilities. Such a view requires a thorough analysis of 1) current and projected external environmental conditions, 2) current and projected internal company capabilities, and 3) how, whether, and when the firm can feasibly  reconcile environmental conditions and company capabilities by implementing  one or more marketing strategies.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

When Project Financing can be Beneficial?


Project Financing has long been used to finance large natural resource projects involving several parties. A large project financing can, by facilitating a large-scale capital project, bring significant public benefits.

Given the complex decisions that have to be made in planning the financing of a major project, it is essential that the project sponsor(s) develop a thorough understanding of the proposed project—its risks, estimated investment requirements, and projected returns. Most importantly, the project sponsor(s) need to determine at the outset whether project financing is the most cost-effective method of financing the project.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Planning your Slide Presentation


Great slide presentations are visual experiences backed by audio to enhance the drama and make important points. Most slide presentations are audio presentations, in which the spoken word is backed or reinforced by a visual display. There is a big difference between those two approaches.

For business meetings, most managers work out the text of their remarks, then compose slides to fit those remarks by illustrating main points or clarifying concepts. This puts the person doing the presentation into the foreground, and the slides projected onto the screen in the background. There is nothing wrong with this approach, except the final product isn’t imaginative and tends to become dull after a few minutes.

If this is the use to which you wish to put slides, the overhead projector is probably a better choice. Especially if the material on the slides consists of numbers, graphs, tables, or words.

Good slide presentations are more visual than verbal. Or, at the least, the audio portion of the presentation is enhanced by the visuals projected onto the screen.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Disambiguating Cash Budget


Most people plan expenditures for food, clothing, and other needs on the basis of expected income. Along with these short-term plans, many individuals and families use income estimates to plan for long-term activities, such as college expenses, the purchase of a house or car. This process of planning for the financial needs of the future is called budgeting. A budget, whether formal or informal, is a plan for utilization of anticipated resources.

The budget of a business serves much the same function as an individual or family budget. Like a personal or family budget, a business budget plans the expenditure of anticipated funds for immediate and long-term goals.

One budget common to both large and small businesses is called the cash budget. The cash budget is a detailed plan showing how cash resources will be acquired and used over a specific time period. For many companies, this time period is monthly for the first three months of the budget period, then quarterly for the remainder of the year. A typical cash budget is composed of four major sections:

  1. The receipts section. This section consists of the sum of the opening cash balance and estimated cash receipts for the budget period. For many firms, the major source of cash receipts is sales.
  2. The disbursement section. This section consists of all estimated cash payments for the budget period. Examples are payments for labor and materials, taxes, equipment purchases, and advertising.
  3. The cash excess or cash deficiency section. The entries in this section represent the difference between the totals of the receipts section and the disbursements section. If receipts are greater than disbursements, there is an excess of cash. If receipts are less than disbursements, there is a cash deficiency.
  4. The financing section. This section gives an account of any borrowing or loan repayments projected to take place during the budget period.

While the cash budget is useful to all companies, it is especially helpful to small firms because management can exercise more control in matching income with disbursements, in negotiating loans with the most favorable interest rates and terms, and in planning investments when there is an excess of cash.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact www.asifjmir.com