The Body Shop International Case Study
The Body Shop International Case Study
1. The assumptions that were used to derive the numbers in this forecast were found by taking the averages of the historical data that was given for 1999-2001. Instead of using the assumptions that were given by The Body Shop, I thought it would be more practical to use the trends shown in the historical data since that is more relevant to what might happen, rather than what The Body Shop wants to see happen. Of course it is possible to take reducing expenses and raising income into consideration but it is more realistic to follow the trends of the most recent years.
It is however important to keep in mind that improvement from year to year is always good to see and if the current trend is one that is sending a company into the red, then something will need to change. A company always wants to be profitable and to stay afloat so forecasts should be used to see where a company might be heading if things were to continue the way they are, or even what changes might happen if corrective measures were to be taken.
In this forecast, a constant increase in sales was used, which was found by taking the average increase between 1999 to 2000 and 2000 to 2001. Of course these sales figures might not be met in the future which would severely lower the overall profit after tax. With this in mind, it is important to be prepared to meet the possibility that this positive forecast might not be met and that more debt and liabilities will have to be paid off than expected. Figuring out what the future markets have in store for a company is always tricky to determine. 2. If the future events of The Body Shop were to happen exactly as this forecast has said they would, then there will need to be a considerable amount of debt financing to be acquired. According to this forecast, GBP222.71 million will be needed to cover future debt. With such a large amount of debt financing needed, it would be a good idea to start changing
1. The assumptions that were used to derive the numbers in this forecast were found by taking the averages of the historical data that was given for 1999-2001. Instead of using the assumptions that were given by The Body Shop, I thought it would be more practical to use the trends shown in the historical data since that is more relevant to what might happen, rather than what The Body Shop wants to see happen. Of course it is possible to take reducing expenses and raising income into consideration but it is more realistic to follow the trends of the most recent years.
It is however important to keep in mind that improvement from year to year is always good to see and if the current trend is one that is sending a company into the red, then something will need to change. A company always wants to be profitable and to stay afloat so forecasts should be used to see where a company might be heading if things were to continue the way they are, or even what changes might happen if corrective measures were to be taken.
In this forecast, a constant increase in sales was used, which was found by taking the average increase between 1999 to 2000 and 2000 to 2001. Of course these sales figures might not be met in the future which would severely lower the overall profit after tax. With this in mind, it is important to be prepared to meet the possibility that this positive forecast might not be met and that more debt and liabilities will have to be paid off than expected. Figuring out what the future markets have in store for a company is always tricky to determine. 2. If the future events of The Body Shop were to happen exactly as this forecast has said they would, then there will need to be a considerable amount of debt financing to be acquired. According to this forecast, GBP222.71 million will be needed to cover future debt. With such a large amount of debt financing needed, it would be a good idea to start changing
Cited: Beattie, Andrew, (2011, December 30). The Basics of Business Forecasting. Retrieved from: http://www.investopedia.com/articles/financial-theory/11/basics-business-forcasting.asp DueDil, (2014). The Body Shop International PLC. Retrieved from: https://www.duedil.com//company/01284170/the-body-shop-international-plc/financials Investopedia, (2014). Econometrics. Retrieved from: http://www.investopedia.com/terms/e/econometrics.asp Investopedia, (2014). Indicator. Retrieved from: http://www.investopedia.com/terms/i/indicator.asp Investopedia, (2014). Time Series. Retrieved from: http://www.investopedia.com/terms/t/timeseries.asp