Method

Methodology

We have looked over The Body Shop’s financial records throughout the last few years, and with that gathered information, we created an excel spreadsheet to assist the company while it faces future financial difficulties by creating different future forecast scenarios. The companies current and past financial standings were very important when determining its future forecasts. This section will be about the methodology and the reasoning’s on how we derived these future finances.

It is important to create simple pro-forma financial statements which include an income statement and balance sheets. The information found in the pro-forma financial statements are crucial in understanding the excel table and assumption sections. The statements contain information such as sales, expenses, retained earnings, assets, liabilities and equity. We use the information found in these statements to help determine EFN (external financing needed).

Trial Assets

Trial Liabilities/Equity

Trial Plug (EFN)

Step 3

Excess Funds Needed – Data Flow Diagram

Excess Funds Needed

Excess Funds Generated

Pro Forma Income Statement

SALES

(COGS)

(OPERATING EXPENSES)

(INTEREST EXPENSE)

PROFIT BEFORE TAX

(TAX)

PROFIT AFTER TAX

(DIVIDENDS)

RETAINED EARNINGS

Step 1

Step 7

Step 4

Pro Forma Balance Sheet

CURRENT ASSETS

FIXED ASSETS

TOTAL ASSETS

CURRENT LIABILITIES

DEBT

EQUITY

TOTAL LIABILITIES/NET WORTH

Step 2

Step 5

Step 6

We are using simple pro-forma financial statements, which do not include “plugs” as we have used in our Excel spreadsheets to help us determine the EFN for The Body Shop. “Plugs” are necessary in assessing the appropriate amount of financing needed for this firm. The “plugs” figures used in out Excel spreadsheets are used in correspondence to debt levels.

Using the pro forma statements, the company or potential investors are able to quickly determine the value of EFN, or external funds needed, to...