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Exercise

Forecasting the balance sheet for Ford

Now that we have the ratios for Ford, the management wishes to improve them for the 2018 financial year.

There is one ratio in particular that management would like to be improved – the debtor days ratio, which is currently sitting at 146 days, while better than Nissan (244 days), is still much higher than Toyota, the industry leader (31 days).

Management would like to bring the debtor days down to below 100 days.

These variables have already been set:

  • filtered_balance_sheet contains the receivables row of the balance sheet.
  • ddays = 99 is the target debtor days.
  • sales = 156776 is the existing sales total.

The formula to calculate debtor days is: \(\dfrac{\text{closing balance debtors}}{\text{sales}} * 365\).

Instructions 1/2

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  • Sales are expected to increase by 10%. Calculate these forecasted sales, f_sales from the existing sales.
  • Rearrange the debtor days formula to calculate the closing balance of debtors needed to achieve 99 debtor days.