Question

The income statement.

ACTUAL FORECAST       
2018 2019      
                          
$71,879               
                          
Cost of Revenue $(51,125)              
                          
gross profit $20,754               
                          
                          
operating expenses   
Selling, General, and Administrative    $(14,248)              
                          
Research and Development           $- 0               
                          
Special Income/Other Charges           $(2,194)              
                          
total operating expenses $(16,442)              
                          
operating home $4,312               
                          
net interest income $(666)              
       edite                  
pre-tax income $3,646               
                          
provision for income tax(19.5%) $(711)              
                          
net income $2,935               

                   

Tag-It’s CEO has predicted a 10% increase in total revenue next year. Utilizing the percentage of sales method, prepare a forecast for next year in the section provided on the Excel spreadsheet provided. The total revenue numbers over the past 4 years for Tag-It Corporation were as follows: Values in Millions:

72,618

73,785

69,495

71,879

Determine whether you think Tag-It can hit the target of a 10% increase in sales next year.

Answer 1

As per Analysis , We noticed that from past trend , Revenue growth is always a Single digit growth and never crossed 10% . Looks like it is very difficult to forecast revenue growth 10% . Company never achieved double digit growth . Expect maximum forecast growth will be around 5% ( max ) in near future .

Last 4 year Revenue position
	Year'15$	Year'16$	Year'17$	Year'18$	Year'19$( Forecast)
Revenue	72,618	73,785	69,495	71,879	79,067
Revenue Growth%		2%	-6%	3%	10%

	The Income Statement
	Actual $	Forecast-$	Calculation base
	2018	2019
Revenue	71,879	79,067	10% increase in Revemue
Less
Cost of revenue	51,125	56,238	10% increase in Cost of Revemue
Gross Profit	20,754	22,829
Less-Operating Expenses
Selling, General and Admnistrative	14,248	15,673	10% increase in Selling , General & Admin
Research and Developmemt
Special Income / other charges)	2,194	2,413	10% increase in Special Income / ( other charges)
Operating Income	4,312	4,743
Less - Net Interest income	666	666	No change
Pre tax Income	3,646	4,077
Provision for tax(19.5%)	711	795	Provision for tax - 19.5% of Income
Net Income	2,935	3,282