Oats R Us

Topics: Balance sheet, Generally Accepted Accounting Principles, Asset Pages: 2 (789 words) Published: May 28, 2013
Case Study Financial Forecasting Growing Plans
“We are growing too fast,” said Mason. “I know I shouldn’t complain, but we better have the capacity to fill the orders or we’ll be hurting ourselves.” Vicky and Mason Coleman started their oatmeal snacks company in 1998, upon the suggestions of their close friends who simply loved the way their oatmeal tasted. Mason, a former college gymnastics coach, insists that he never “intended to start a business,” but the thought of being able to support his college team played a significant role in motivating him to go for it. After considerable help from local retailers and a sponsorship by a major bread company their firm, Oats ‘R’ Us, was established in 1998 and reached sales of over $4 million by 2004. Given the current trend of eating healthy snacks and keeping fit, Mason was confident that sales would increase significantly over the next few years. The industry growth forecast had been estimated at 30% per year and Mason was confident that his firm would be able to at least achieve if not beat that rate of sales growth. “We must plan for the future,” said Vicky. “I think we’ve been playing it by ear for too long.” Mason immediately called the finance manager, Jim Moroney. “Jim, I need to know how much additional funding we are going to need for the next year,” said Mason. “The growth rate of revenues should be between 25% and 40%. I would really appreciate if you can have the forecast on my desk by early next week.” Jim knew that his fishing plans for the weekend had better be put aside since it was going to be a long and busy weekend for him. He immediately asked the accounting department to give him the last three years’ financial statements (see Tables 1 and 2) and got right to work! Questions: 1. Since this is the first time Vicky and Mason will be conducting a financial forecast for Oats ‘R’ Us, how do you think Jim should proceed? Which approaches or models can they use? What are the assumptions necessary for...
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