How Do You Complete A Projected Profit & Loss Statement?
Every business needs to project a profit and loss statement for the next few years in order to help it better understand its needs. A projected profit and loss statement provides an analysis of the expected profitability of the business and often allows creditors to select among loan applicants. Analyzing business performance on a regular basis enables management to detect problems and solve them. Calculate growth rates for all major items reported in the historic income statements by subtracting the past year’s value from the next year’s value and dividing it by the past year’s value. Add the growth rates estimated for the past years and divide by the number of years to obtain the average growth rate in each item on the profit and loss statement. Estimate the projections for the revenues and costs for the next year by multiplying the prior year value by the average growth rate. Use the average growth rate as an assumption for future growth rate. Repeat the process for estimating the p
