Reference no: EM132533764

Projected (also called pro-forma) financial statements are extremely important for financial planning information about the financial health of an organization. A very simple example of a projected income statement (year ended December 31st, 2015) is found below:

Revenues ($7 units × 100,000) $700,000

Variable costs ($2 × 100,000) 200,000

Contribution margin 500,000

Fixed costs 300,000

Net income $200,000

Question 1 : Discuss in some detail two or three key assumptions that would have gone into the projected income statement. Discuss factors such as the likelihood that the assumption might become dated, and the impact on projected income. As an example, the projection assumes that the costs of each unit will remain at $2 throughout 2015 - challenge the assumption that this is accurate. In your discussion, explore possibilities and use critical thinking to challenge assumptions. The cost of sales example above is just a start - feel free to continue with it, adding much more insight. Remember good examples get rewarded - providing examples of where a company made certain assumptions that later proved inaccurate, and the repercussions, will enrich the report immensely.