Report name: Sample Forecast
How the Profit and Loss Forecast is Calculated
Gross profit minus overheads and expenses describes pre-tax profit. There is a lot more than that to a successful profit and loss forecast though.
Gross profit minus overheads and expenses describes pre-tax profit. There is a lot more than that to a successful profit and loss forecast though.
| forecast for year beginning the 1st. | May 2024 | May 2025 | May 2026 |
| Sales | 1,500,000 | 1,650,000 | 2,200,000 |
| add: Delivery / Service Charges | 37,500 | 41,250 | 55,000 |
| Total Sales | 1,537,500 | 1,691,250 | 2,255,000 |
| less: Cost of Goods Sold | 885,000 | 973,500 | 1,298,000 |
| Gross Profit Cfwd | 652,500 | 717,750 | 957,000 |
| Wages NI and Pensions | 300,000 | 310,000 | 330,000 |
| Administrative Overheads | 105,800 | 127,200 | 145,500 |
| Selling Overheads | 136,381 | 156,500 | 203,567 |
| Depreciation | 10,876 | 17,543 | 20,290 |
| Operating Overheads and Expenses | 553,057 | 611,243 | 699,357 |
Operating Profit | 99,443 | 106,507 | 257,643 |
| less: Interest Charges | 5,062 | 7,469 | 5,469 |
| add: Exceptional Item (Profit on Asset Sales) | 0 | 0 | 0 |
Pre-Tax Profit for the Year | 94,381 | 99,038 | 252,174 |
| less: Corporation Tax | 15,236 | 18,237 | 59,546 |
| Net Profit Cfwd | 79,145 | 80,801 | 192,628 |
| Corporation Tax % of Pre Tax Profit | 16.1% | 18.4% | 23.6% |
This is the net profit forecast earned exclusively from core trading activity. Operating profit is also known as EBIT - Earnings before interest and tax.
It describes the predicted performance of the business exlusively from core trading activity and its expected return on investment from that.
If your operating profit forecast is unsatisfactory, you can examine how simple changes to margin, overheads or fixed asset purchases can improve it in real time, using the What-IF Calculator and Planner. Changes in financing can also be investigated.
Profits (or losses) from the sale of fixed assets or income from investments are "exceptional items" unconnected with core trading activity.
Exceptional profits (or losses) are one-time events unconnected with operations, so are only added to net profit cfwd (net income) once the operating profit forecast has been calculated.
This and all of the other forecasts simply come from your own projected figures for sales, gross profit margin, overheads, fixed asset, purchases, disposals and financing.
Corporation tax including capital allowances and VAT are automatically calculated and included in the forecasts, which can be for one, two or three years.
Fees other than interest that are associated with financing activity, such as bank, charge card or invoice financing are charged to the operating profit forecast.
Interest charges such as from a bank overdraft are only charged to profit and loss as and when they arise.
The exception to this is when the sum of interest at a fixed rate is calculated and applied to the value of a contract from the outset, such as for a hire-purchase agreement. Interest is then paid monthly in line with the installments of the principal.
Retained profits after tax are those available for distribution as dividends.
They are variously referred to in the balance sheet as reserves or shareholders funds and form part of the equity or net worth of the company.
You may not declare a dividend in excess of the vlaue of accumulated profits as shown in the equity of the balance sheet.