Compass Group Plc

In: Business and Management

Submitted By bemella89
Words 882
Pages 4
Part B Issues to consider when preparing projected financial statements
When dealing with financial statements one issue to consider; fixed costs will always remain the same for a long period of time, whereas, variable cost differ with the level of activity it entails.

The Compound Annual Growth Rate (CAGR):
Market’s growth rate is calculated and measured by CAGR. Companies use this formula to project financial statements because it has a persisting percentage rate, that allows a market grow each year reaching the value. A five year review of annual sales revenue is considered when forecasting.

Factors that need to be considered when preparing financial statements
Non-current Asset: Because they are fixed cost they will always remain the same. It will change however, if the organisation decides to take on new investments, like property, plant and equipment. It will increase in the value of the current asset.
Current Asset: Level of sales increase, then it will mean a level of increase in current asset.
Inventories: Variable costs of raw materials, direct labour and direct expense could increase the level of inventories.
Account receivables: When the level of sales increase the value of trade receivables will also increase.
Current liabilities: If there is an increase in sales, there will also be an increase in the current liabilities, like creditors to meet the set goal.
Accounts payable: When there are more purchases, the level of sales will increase.
When there is an increase in the level of sales, there is will be a high increase in the cost of sales and operating expenses.
This can be seen as the:
Cost of sales
It can be calculated with the inventories like raw materials.
Operating cost:
These are expenses for the company, like distribution, sales etc.

Projected Income statement as for the year ended 30th September 2012 | £m…...

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