Simple P&L Forecast

Overview Financial modeling is a critical skill for understanding how businesses generate profit and manage expenses. A core component is the Income Statement, which tracks a company’s performance from top-line revenue down to net income. Before tackling full three-statement modeling, it’s important to build familiarity with forecasting the P&L on its own. This exercise provides that foundational practice. In this exercise, you will forecast the P&L for Medivance Systems, a mature medical equipment company supplying hospitals and clinics, over 2019–2021. Medivance Systems generates steady revenue from recurring equipment sales and service contracts, with moderate operating costs, stable depreciation, interest, and tax assumptions. Using historical data from 2014–2018, you will project Revenue, Gross Profit, EBIT, EBITDA, and Net Income, practicing the flow of revenues and expenses through the P&L. Learning Goals Warm-up for full modeling: Complete a simplified P&L forecast to prepare for more complex three-statement models. Understand income statement flow: Learn how Revenue, costs, operating profit, and Taxes interact from top-line to Net Income. Practical skill development: Gain confidence in projecting financial performance and calculating key metrics such as Gross Profit, EBITDA, EBIT, EBT, and Net Income. Key Concepts In this exercise, you will use historical financial data from 2014 to 2016 to forecast performance for 2017–2021. Key concepts include: Revenue: Projecting sales based on historical trends and growth assumptions. Cost of Goods Sold (COGS): Estimating direct costs to produce goods or services. Operating Expenses (SG&A): Forecasting overhead and administrative expenses as a percentage of revenue. Taxes: Applying a consistent tax rate to pre-tax earnings. Gross Profit: Revenue minus COGS, showing how efficiently the company produces its goods or services. EBITDA: Earnings before interest, taxes, depreciation, and amortization; a measure of operational profitability. Operating Income (EBIT): Earnings before interest and taxes, reflecting profitability after accounting for operating expenses and D&A. EBT: Earnings before taxes, showing profit after interest expenses but before taxes. Net Income: Final profit after all expenses and taxes, representing the company’s bottom line. By completing this forecast, you will see how changes in revenue, costs, or expenses flow through these metrics, helping you internalize the full income statement structure.

Practice Simple P&L Forecast with interactive Excel modeling exercises in our Financial Statement Modeling module.

This hands-on modeling exercise helps you master Simple P&L Forecast through real-world Excel practice and financial modeling techniques.