Help with ER Question

I need help on a question for school and was hoping some of you fellow posters could help me out. Basically, I need to build an income statement/net earnings/eps model in Excel. I have to provide at least five years of history and two years of projections, while making sure the assumptions behind my forecast are clearly presented and explained. The model has to be based on the same format as traditional net income and earnings per share models found in the majority of stock analyst's reports.
I am not really even sure where to start, beside gathering the five year history. I am not familiar with what a traditional net income and earnings per share model looks like. And I do not know how to go about figuring the two year projections. Any help would be very much appreciated.

 
Best Response

Get 5 year hisotricals off the 10-Ks and base projections on publicly available analyst estimates or just make up your own BS assumptions (sales decline by 20%, increase expenses at the rate of inflation, decrease margin by 50 bps each year, etc.)

Provide macro commentary (retail headwinds, consumer discretionary down, etc.) etc. get it from the MD&A section of the latest filing or make it up

Your "model" with literally be 8 columns (line item detail, FY04A, FY05A, FY06A, FY07A, FY08A, FY09E, FY10E to project you obviously just do last year's value * (1+%increase), hold steady (= last year's cell to the left), or common size (based on balance sheet ratios)

 

Build multiple scenarios that can drive the model - I like using the offset function.

The 10-k and 10-Qs should provide good guidance for management's expectations, which can be your 'base' scenario. Most models use sales growth as the primary driver, along with gross margin % and SG&A. If you can access any existing research reports on Dell, they'd be extremely helpful.

I'd imagine this is a group project?

 

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