The Body Shop International

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The Body Shop International
In this case, the key is to understand and study the conditions and circumstances of how revenue grew by 13 percent and the decline in pretax profit of 21 percent in 2001. The underlying factor that caused this, would be the company’s lack of forecasting, which would be the usage of the financial modeling. The financial model gives a better forecast prior to the project as well as a good monitor during the project. For the forecast, we only had financial statements from the years 1999-2001. The forecasting was done by using the percent-of-sales method. Using this method, we forecast the sales with its relation to all the other accounts. Therefore the financial statements are based on the assumptions and their relationship to sales. It is assumed that sales will grow constantly at 11 percent every year. The figure is a historical average of the three years 1999-2001. At that time, the company was going through its maturity stage of its products life. We use financial forecasting to see how it can impact the company. 1)Our consulting group derived our analysis by using your current financial statements and forecasting forward the next two years. Since we cannot forecast what some factors will be in the future, our firm took an average of various costs, assets, and liabilities for the previous three years. We choose base case assumptions because future factors are highly correlated with the past, since we only had access to the previous three year statements, an average was suffice. Exceptional costs are assumed to be £0 for the following three years, since this costs where associated with closing unprofitable shops in 1999, costs of supply chain development and redundancy costs in 2001. Those are random costs that the firm does not plan to incur during the next years. In the same way, Restructuring costs are also 0 for the period 2002 – 2004 since the previous year costs are related to the sale of manufacturing plants, and...
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