Calculate historic (year-on-year) sales growth for each business unit, segment and total consolidated sales Use Segment Disclosures
Question:
Calculate historic (year-on-year) sales growth for each business unit, segment and total consolidated sales
Use Segment Disclosures to Forecast Income Statement
Following are revenue and cost of revenue numbers for Thermo Fisher Scientific.
THERMO FISHER SCIENTIFIC INC. | ||
---|---|---|
Consolidated Statement of Income | ||
For Year Ended December 31 ($ millions) | 2018 | 2017 |
Revenues | ||
Product revenues | $24,528 | $22,586 |
Service revenues | 7,137 | 4,607 |
Total revenues | 31,665 | 27,193 |
Costs and operating expenses | ||
Product cost of revenues | 12,587 | 11,668 |
Service cost of revenues | 4,965 | 3,244 |
Total cost of revenues | 17,552 | 14,912 |
Selling, general and administrative expenses | 7,874 | 7,155 |
Research and development expenses | 1,257 | 1,153 |
Restructuring and other costs, net | 65 | 126 |
Total costs and operating expenses | 26,748 | 23,346 |
Operating income | 4,917 | 3,847 |
Other expense, net | (677) | (690) |
Income from continuing operations before income taxes | 4,240 | 3,157 |
Income tax expense | 421 | 261 |
Income from continuing operations | 3,819 | 2,896 |
Loss from discontinued operations | 0 | (4) |
Net income | $3,819 | $2,892 |
Required
a. Use the historic growth in total revenues (from 2017 to 2018) to forecast total revenue for 2019. Use the historic rate of total cost of revenues to total revenues to forecast total cost of revenues. Other forecast assumptions follow:
Selling, general and administrative expenses | 24.9% of total revenues |
Research and development expenses | 4.0% of total revenues |
Restructuring and other costs, net | $0 |
Other expense, net | No Change |
Income tax expense | 23% of pretax income |
Rounding instructions:
- Round growth rate factors for revenue accounts to three decimal places (for example, 1.034555 = 1.035) or one decimal place as a percentage (1.034555 = 103.5%).
- Round rate of cost factors to one decimal place, as a percentage (for example, 0.634555 = 63.5%).
- Round your final answers below to the nearest whole dollar.
- Round growth rate factors for revenue accounts to three decimal places (for example, 1.034555 = 1.035) or one decimal place as a percentage (1.034555 = 103.5%).
- Round rate of cost factors to one decimal place, as a percentage (for example, 0.634555 = 63.5%).
- Round your final answers below to the nearest whole dollar.
Thermo Fisher Scientific | |
---|---|
Forecasted Income Statement | |
Dec. 31, 2019 | |
Forecast | |
Product Revenues | Answer |
Service Revenues | Answer |
Total Revenues | Answer |
Total cost of revenue | Answer |
Selling, general and administrative expenses | Answer |
Research and development expenses | Answer |
Restructuring and other costs, net | Answer |
Total costs and operating expenses | Answer |
Operating Income | Answer |
Other Expense, Net | Answer |
Income from Continuing Operations Before Income Taxes | Answer |
Income tax expense | Answer |
Net Income | Answer |
b. Refine your forecast by using the separate historic growth in product revenues and service revenues (from 2017 to 2018) to estimate 2019 product and service revenues respectively for 2019. Also, use the historic growth in cost of revenues for each segment to forecast separate segment cost of revenues. Assume other forecast assumptions are as in part a.
Rounding instructions:
Thermo Fisher Scientific | |
---|---|
Forecasted Income Statement | |
Dec. 31, 2019 | |
Forecast | |
Revenues | |
Product Revenues | Answer |
Service Revenues | Answer |
Total Revenues | Answer |
Product Cost of revenues | Answer |
Service Cost of revenues | Answer |
Total cost of revenue | Answer |
Selling, general and administrative expenses | Answer |
Research and development expenses | Answer |
Restructuring and other costs, net | Answer |
Total costs and operating expenses | Answer |
Operating Income | Answer |
Other Expense, Net | Answer |
Income from Continuing Operations Before Income Taxes | Answer |
Income tax expense | Answer |
Net Income | Answer |
c. Do the two forecasts differ significantly between part a and b? Answer Yes No
Which forecasted income statement do we believe is more accurate? Answer Forecast from Part a Forecast from Part b
Applying International Financial Reporting Standards
ISBN: 978-0730302124
3rd edition
Authors: Keith Alfredson, Ken Leo, Ruth Picker, Paul Pacter, Jennie Radford Victoria Wise