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4. You are required to identify timeframes and parameters to be used for the financial forecasts.

5. You are required to use the EXCEL to include all the parameters or assumptions (i.e. key forecast drivers) used, and prepare proforma income statement and balance sheet.

6. You are required to forecast the free cash flow for the company.

7. You are required to write a REPORT (refer to Notes to the Students for more information) to include all the information and workings used in the preparation of proforma income statement and balance sheet, and free cash flow forecast.

Notes to the Students:

• You can use linear trend function to prepare the financial forecast, but keep in mind that the assumptions should be reasonable by cross checking with the organisational policy and procedures.

• Use the percentage of sales method to forecast the accounts in the income statement and T-accounts or ratios method to forecast the accounts in the balance sheets.

• You can group the operating expenses but have to make sure the key accounts (e.g. depreciation, net interest expenses and tax) should be separately disclosed in the proforma financial statements.

• Use the short-term debt or debts as the plug (the last account used to balance the balance sheet).

• You are required to submit the EXCEL to include:

Financial ratios for the actual three years;

Assumptions used in the financial forecasts for all the accounts;

Proforma income statement and balance sheet (including the amounts in the three actual years);

Free cash flow forecasts.

• You are required to submit the report in the WORD to include:

Timeframes of your financial forecasts and reason;

Organisational policy and procedures;

Formulae used to work out the relevant ratios;

Briefly comment the profitability, liquidity and solvency of the company based on the financial ratios you calculated;

All the information and workings used for your financial forecasts in the EXCEL;

Identify the relevant person in charge to obtain approval;

Your opinion about whether the company has the ability to meet its long- term obligations if the company is about to apply for the loan.

• You can use the following templates for your work. Note that the accounts and amounts shown in the templates are EXAMPLE ONLY.

Company is NIB Health Insurance

Financial Forecasts Undertake your own research to obtain an organisation's LATEST THREE-YEAR annual reports. You can use one from an organisation with which you are familiar or one which is freely available on the internet (company's website) or from ASIC or ASX. You are the Financial Planning and Analysis manager of the company you are choosing. In order to invest a project, the company is planning to apply for a loan from the bank. You were assigned by the CEO the task of advising the Board of Directors about the financial forecasts and the company's ability to meet the long-term obligations. The proposed loan details are shown as below: Loan amount $5,000,000 Loan term: 4 years Interest rate 6.50% Payment frequency: Monthly 1. You are required to undertake your own research from the company's website, and read all the relevant information from the annual reports to understand and identify the organisational policy and procedures in regards to (not limited to) sales, inventory management, collection policy, credit, purchasing and payment policy and cost structures. Calculate the financial ratios for the actual three years by using the following template. You can calculate the relevant ratios based on a year-end balance instead of the average beginning and ending year balance. Financial Ratios Actual Year 1- 20XX Actual Year 2- 20XX Actual Year 3- 20XX | Return on Equity Return on Assets Debt to Equity Ratio Time Interest Earned Days in Receivables Days in Inventory Days in Payables Current Ratio Quick Ratio 3. Briefly comment the profitability, liquidity and solvency of the company based on the financial ratios you calculated in the Part 2 Financial Forecasts Undertake your own research to obtain an organisation's LATEST THREE-YEAR annual reports. You can use one from an organisation with which you are familiar or one which is freely available on the internet (company's website) or from ASIC or ASX. You are the Financial Planning and Analysis manager of the company you are choosing. In order to invest a project, the company is planning to apply for a loan from the bank. You were assigned by the CEO the task of advising the Board of Directors about the financial forecasts and the company's ability to meet the long-term obligations. The proposed loan details are shown as below: Loan amount $5,000,000 Loan term: 4 years Interest rate 6.50% Payment frequency: Monthly 1. You are required to undertake your own research from the company's website, and read all the relevant information from the annual reports to understand and identify the organisational policy and procedures in regards to (not limited to) sales, inventory management, collection policy, credit, purchasing and payment policy and cost structures. Calculate the financial ratios for the actual three years by using the following template. You can calculate the relevant ratios based on a year-end balance instead of the average beginning and ending year balance. Financial Ratios Actual Year 1- 20XX Actual Year 2- 20XX Actual Year 3- 20XX | Return on Equity Return on Assets Debt to Equity Ratio Time Interest Earned Days in Receivables Days in Inventory Days in Payables Current Ratio Quick Ratio 3. Briefly comment the profitability, liquidity and solvency of the company based on the financial ratios you calculated in the Part 2