Based on Siebel our strategies are centered on increasing technology, innovation and customer service. We are looking to integrate more with the cloud service,mobile apps, etc. to gain thecompetitive advantage that Salesforce (see attached journal and company website to help) . This assignment requires the completion of Siebel's pro forma with strategy the without strategy has already been completed in a previous order with your company. Also provide a clear writtenanalysisexplaining the results (an example is attached).
1.Pro-Forma Financial Statements (I/S, B/S and Statement of Cash Flows) with deltas out 3 years and analysis
Each year must have 2 columns: 1 with your strategy and 1 without your strategy.
a.Include Pro-Forma ratios for the first year out with deltas contrasting from the most current year’s ratios.
Abbot Projected Financial Analysis with Strategy
Income statement
In light of the leadership differentiation and growth theories considered the following financial projections have been done for Abbott Inc. As per the projections provided the revenues are expected to increase at the same rate of 11% as the previous 2018 period for the three years 2019, 2020 and 2021. The income statement analysis indicates increasing revenues and net earnings for the three years. The financial projection for Abbot has been based on the assumptions that there is a 3% increase in the cost of sales and a 7% annual increase in operating expenses. The firm has an interest expenditure decreasing at 9% annually for each of the three years as per the information in the audit report. The net income for each of the three years has also been projected to increase from $3859 to $8132.75 from 2019 to 2020 (Advameg Inc, 2018). These projections are a forecast for the near future based on the information in the 2018 annual report, the market analysis and highlights what the firm can do to maximize the potential outcomes.
Balance sheet
A look at the balance sheet reveals that the total assets projection was expected to decrease from $57471 in 2019 to $50021 in 2021. The corresponding current assets also decreased from $11514 to $ 10232 for the same three-year period given the increase in inventory and a decrease in cash liquidity (Abbott Inc., 2018). These non-current assets are represented by goodwill, intangible and other long term or fixed assets which are all expected to decrease due to the consistent rate of amortization and depreciation of fixed assets
The total liabilities section of the balance sheet has been projected to be decreasing for each of the three years given the significant payments of long-term debt. The equity section of the balance sheet has the common equity increased for each of the three years from 23982 to 24951 from 2019 to 2021. Other equity items which increased for each of the three years are the paid in capital which increased from $9558 to $15416 from 2019 to 2021. The retained earnings, however, increased from $25542 in 2019 to $27626 in 2021 which can be attributed to the increase in net income reported (Abbott Inc., 2018). As per the audit report, the firm expects to continue well in terms of revenues and net incomes which subsequently increase the net assets. The firm’s performance is expected to be largely the same within the short-term period given the repayment of long-term debt and finances used for investment activities.
Ratios
The current ratio increases from 2.06 to 3.48 for the projected period meaning more liquidity. The debt-equity ratio drops from 0.64 to 0.34 thus less debt. The inventory turnover increases from 8.5 to 9.5 which indicate more efficiency. The accounts receivable turnover increases from 7 to 11 thus more efficient collection of debt. The operating profit increases from 16% to 26% which indicates a higher level of profit projected. The return on assets increases from 7% to 13 % and the return on equity increases from 11% to 17% (Advameg Inc, 2018) which indicates a better use of the assets and equity in generating more business as per the projected figures.
Future company performance
Given the outlined ratios; the company is expected to perform well with overall expected reduced debt levels, increased operational efficiency and expected increasing revenues and net incomes. The cost leadership strategy focuses on cost reduction and optimization of operational thus optimal higher incomes and net earnings. Projection based on the cost leadership strategy elaborates more efficiency in operations thus lower overall costs. For a given level of income, lower costs mean higher overall outcomes.
References
Annual report. (2019). Retrieved from Abbott: https://www.abbottinvestor.com/financials/annual-reports
Advameg Inc. (2018).
Forecasting. Retrieved from Advameg Inc website: Retrieved from, https://www.referenceforbusiness.com/management/Ex-Gov/Forecasting.html