Q5 FINANCIAL FORECASTING The price of one share of stock in The Clorox Company (CLX) went from $157.31 on 1/1/2020 to $236.51 on 7/1/2020 (+50.3%), only to tumble since then to close at just $138.30 on Friday, May 20/2022. This reversal in valuation can be attributed to the diminishing emphasis on disinfecting everything as the pandemic began to fade, reinforced this past week by the poor results of Walmart (alone responsible for 25% of Clorox sales) and the effects of inflation on consumer behavior. According to Morningstar the fair value of CLX is $161 (5-star: $129 - 1-star: $201), and therefore at current prices the stock is selling at a discount of approximately 14%. Ms. Claire Ollua your supervisor at the pension fund -- is considering adding Clorox to the fund's portfolio, and has asked that you forecast CLX's financial statements for fiscal year 2022. To see if you can handle this important challenge, Ms. Ollua has scheduled to meet with you early tomorrow morning. At that meeting she will ask how you would forecast for fiscal 2022 two key working capital items (inventory and accounts payable), as well as payments to suppliers. Historical income statements and balance sheets for the period 2017-2021 are given in tab "Clorox". Ms Ollua requested that you base your forecasts on the assumption that next year's revenues will be $7,170 Million (Source: Yahoo Finance, consensus estimate as of 5/22/2022, by 16 analysts). Required: (*) For each item below, write your equation(s) and compute your estimate in the tab "Clorox" where the historical financial statements are. Explain your approach very briefly in words on this tab, in items A through E. PTS. (**) The term "plausible" as used below means "based on values of the measure observed in the past". 5.0 (A) Estimate the balance of inventory at the end of fiscal year 2022. Use a plausible measure of inventory turnover (or, equivalently, days of COGS in inventory) as the basis of your forecast. 5.0 (B) Estimate the balance of accounts payable at the end of fiscal year 2022. Use a plausible measure of payables turnover (or, equivalently, days of purchases in accounts payable) as the basis of your forecast. 5.0 (C) Estimate payments to suppliers during fiscal year 2022. Q5 FINANCIAL FORECASTING The price of one share of stock in The Clorox Company (CLX) went from $157.31 on 1/1/2020 to $236.51 on 7/1/2020 (+50.3%), only to tumble since then to close at just $138.30 on Friday, May 20/2022. This reversal in valuation can be attributed to the diminishing emphasis on disinfecting everything as the pandemic began to fade, reinforced this past week by the poor results of Walmart (alone responsible for 25% of Clorox sales) and the effects of inflation on consumer behavior. According to Morningstar the fair value of CLX is $161 (5-star: $129 - 1-star: $201), and therefore at current prices the stock is selling at a discount of approximately 14%. Ms. Claire Ollua your supervisor at the pension fund -- is considering adding Clorox to the fund's portfolio, and has asked that you forecast CLX's financial statements for fiscal year 2022. To see if you can handle this important challenge, Ms. Ollua has scheduled to meet with you early tomorrow morning. At that meeting she will ask how you would forecast for fiscal 2022 two key working capital items (inventory and accounts payable), as well as payments to suppliers. Historical income statements and balance sheets for the period 2017-2021 are given in tab "Clorox". Ms Ollua requested that you base your forecasts on the assumption that next year's revenues will be $7,170 Million (Source: Yahoo Finance, consensus estimate as of 5/22/2022, by 16 analysts). Required: (*) For each item below, write your equation(s) and compute your estimate in the tab "Clorox" where the historical financial statements are. Explain your approach very briefly in words on this tab, in items A through E. PTS. (**) The term "plausible" as used below means "based on values of the measure observed in the past". 5.0 (A) Estimate the balance of inventory at the end of fiscal year 2022. Use a plausible measure of inventory turnover (or, equivalently, days of COGS in inventory) as the basis of your forecast. 5.0 (B) Estimate the balance of accounts payable at the end of fiscal year 2022. Use a plausible measure of payables turnover (or, equivalently, days of purchases in accounts payable) as the basis of your forecast. 5.0 (C) Estimate payments to suppliers during fiscal year 2022
