Strategic Investment Proposal Part 1- Income Statement Forecast ( Operating Budget)
Summary
As with all businesses, Every internal business decision has financial implications for the organization. As a well- rounded MBA, you will make, a decision that impact an organization's financial health and sustainability. These decisions include how to raise capital, how to increase the value of the company, or the return to investors, how to balance Cash flow with risk management, and how to budget and plan  for external financing
You will assume the role of a financial analyst at Boston retail  where you will be asked to assist with the corporate financial planning process. This planning process insures that the organization has sufficient resources to execute its strategies. The financial planning. process consists of establishing an operating budget in the short-term and making capital budgeting decisions in the long -term. You will assist in prioritizing how resources are allocated within the organization
financial management builds upon concepts used in accounting, but unlike financial accounting that focuses on reporting, financial managers use this information to make strategic decisions. The budgeting or financial planning process is an art rather than a. perfect science, as you must consider market factors such as the competition, changing consumer demands, and the impact of technology, government regulations, and macroeconomic factors in establishing your revenue and expense projections

Instructions:
The first step is to develop an income statement forecast ( also referred to as an operating budget). This includes projecting sales/ revenue and. operating expenses to determine the level of expected profitability. A typical approach is to use past data to forecast future sales. A company will look at its historical pattern of sales growth to estimate future sales. Using historical data without considering the impact of both internal and external factors can be extremely risky. Therefore it is important to consider both external and internal factors that may impact future sales

Scenario :
Assume that the year 20x1 for Boston Retail is the most recent concluded calendar year. Therefore,20x2 is the forecast calendar year

Forecast the operating budget by completing the following steps:
1. Estimate three revenue growth rates for the forecast year 20X2: expected, optimistic, and pessimistic. Consider factors such as :
. External factors
. Most recent revenue growth rates for competitor firms ( such as Nike, The Gap,, American Eagle Outfitters)
. Projected growth within the industry
. Firm's market share
. General economic conditions
. Competitive forces
. Customer demand
Internal factors If relevant :
. Product mix
. Manufacturing capacity
2. Forecast operating expenses ---A manufacturing firm will need cost of goods sold in addition to operating expenses that must be estimated. You can use the same numbers as in the case.
.Observe the impact on the financial statements when you change the operating  expense estimates
3. Create a written discussion describing your spreadsheet analysis and justification of your results.