1 What are financial modeling guidelines and why are they relevant? Review Late A stringent set of rules about financial modeling, which are required for Microsoft Excel to function properly. A set of principles and guidance for financial modeling which promote consistency across models used by all stakeholders. A list of optional keyboard shortcuts which speed up the process of financial modeling. A set of rules about financial models issued by the Financial Accounting Standards Board (FASB). They are required for financial reporting purposes. Page 1 of 20 Next Page Safety Pro-Tech Inc. produces protective equipment. The company's primary source of revenue is from the sale of N95 masks. The industry has seen considerable growth over the past two years, and this has been reflected in the company's financial performance. However, competition in this market has increased and the product is now considered to be a commodity with relatively low barriers to entry. You have been engaged to help the company forecast its revenue and plan for future growth. Management has asked for your preliminary thoughts on their internally prepared schedule which can be downloaded. 1- Revenue.xlsx 2 What does the observed level of operational efficiency indicate? The business has been extremely efficient and has made effective use of its operational capacity. The sales volume growth appears conservative, given the company's plant capacity. The company should consider additional capital expenditure to increase the capacity of the plant. The level of operational efficiency can expect to persist into the future. Review Later Revenue Schedule All figures in USD thousands unless stated 2019A 2020A 2021A 2022F 2023F 2024F 2025F 2026F Days in Period 365 365 365 365 365 365 365 365 3 0 OPERATIONS 1 2 Sales Volume Growth 10.5% 8.2% 5.0% 7.0% 5.0% 5.0% 4.0% 3 4 Sales Volume (Units Day 10,051 11,107 12,021 12,622 13,506 14,181 14,890 15,486 5 Plant Capacity (Units/Day 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 6 Operational Efficiency 71.8% 79.3% 85.9% 90.2% 96.5% 101.3% 106.4% 110.6% 7 8 9 0 21 VOLUME 22 23 Days in Period 365 24 Sales Volume 25 Sales Volume (Linits/Day) (Units 10,051 365 11,107 3,668,615 4,054,055 4,387,665 365 365 365 12,021 12,622 13,506 4,607,048 4,929,542 26 365 14,181 15,486 5,176,019 5,434,820 5,652,212 365 14,890 365 27 28 PRICING 29 30 Pricing Increases 31 Unit Price (USEUR) 8.50 17.6% 10.00 10.0% 11.00 15.0% 12.65 15.0% 14.55 15.0% 16.73 10.0% 18.40 10.0% 20.24 32 33 34 REVENUE 35 36 Sales Volume (Units) 37 Sales Price (USDA) 38 Revenue 3,668,615 4,054,055 4,387,665 4,607,048 8.50 10.00 11.00 12.65 31,183 40,541 48,264 58,279 4,929,542 14.55 71,713 5,176,019 16.73 86,593 5,434,820 18.40 100,015 5,652,212 20.24 114,417 Cover Question Safety Pro-Tech Inc. produces protective equipment. The company's primary source of revenue is from the sale of N95 masks. The industry has seen considerable growth over the past two years, and this has been reflected in the company's financial performance. However, competition in this market has increased and the product is now considered to be a commodity with relatively low barriers to entry. You have been engaged to help the company forecast its revenue and plan for future growth. Management has asked for your preliminary thoughts on their internally prepared schedule which can be downloaded. 1- Revenue.xlsx 3 Is the pricing forecast realistic? Yes. Given the historical growth in pricing, a forecast with 10% to 15% annual increases seems realistic. Yes. The forecast is realistic given the observed operational efficiency in the business. Yes. The forecast seems conservative given the current environment for mask producers. No. The degree of pricing power is not realistic as increased competition has entered the market. 000 Review Later Download the attached excel file. 3- Income Statement.xlsx 6 In terms of gross-profit, which of the following periods likely requires further investigation or analysis? Fiscal 2016: Margins appear to be lower than expected. Fiscal 2021: Gross profit appears too high in terms of revenue. Fiscal 2014: As we do not have comparable figures for 2013. Fiscal 2018: Gross profit is too low given the historical growth. 4