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What is Profitability Projections


PROFITABILITY PROJECTIONS:  Finance Assignment Help

The traditional and sophisticated discounting methods of project evaluation have been falted because the financial analysis looks at the capital expenditure proposal in isolation and works out the ROI, PB, NPV or IRR whereas it is has an impact of expansion proposal on the working results of the company. This would highlight the working results - profit/loss statement without and with the new project.
This is computed as below:
1. Cost of production
2. Total administrative expenses
Administrative Expenses
Administrative salaries
Remuneration etc. to directors
Professional and consultants fees
Light, postage, Telegrams, Telephones, office stationery etc.
Taxes and insurance  On office property
Miscellaneous expenses

3. Total sales expenses
4. Royalty, know-how payable
5. Total cost of production (1 + 2 + 3 + 3 + 4)
6. Expected sales
7. Gross profit before interest and financial expenses (6 - 5)
8. Total financial expenses

Interest on term loans (long-term)
Interest on borrowings for working capital (short term)
Guarantee commissions etc.

9. Depreciation charges
10. Operating profits (7 - 8 - 9)
11. Other incomes
12. Preliminary expenses written off
13. Profit before Taxation (10 + 1 - 12)
14. Provision for Taxation
15. Profit after Tax (14 - 13)

Less Dividend on preference Capital @
Less Dividend on Equity Capital @
16. Retained profits
17. Net Cash Accruals (16 + 9 + 12)

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