PROSPECTIVE ANALYSIS. Accounting, Finance, SPSS Case Study (Case Study Sample)
To forecast the profitability for Texas Roadhouse Inc and possibilities of its stock rising in price.source..
Developing the projections for the coming years based on the historical information available on the company aids in developing valuation for the firm going forward. It provides an analysis from which the company’s ability to survive, remain profitable, or improve its profitability is evaluated. Valuation of the stock of the company going forward is also made possible considering the projections provide a basis on which investors' base to make decisions on the future. In examining this element for Texas Roadhouse will start with an examination of the current income statement of the company, an evaluation of the possible factors involved in growth, a projection of the income statement and valuation of the company's stock going forward.
Current Year Income Statement
Generating the income projections of the company for the future requires that one obtains the income statement of the company for the current year. A comparison between income growths for the two previous years may provide a consistent income growth percentage useful in forecasting income growth that the company will record in the future. The evaluation below employed the consolidated income statement of Texas Roadhouse Inc for the years from 2014 to 2016. These were instrumental in determining the profitability of the company in 2017 (Texas Roadhouse, 2017).
Possible Growth Elements
The development of a forecast on income statement relies on projections made by various parameters employed on the current income statement values. The changes are evaluated using percentage changes, the percentage change in another line item in the income statement, and line item specific changes. The percentage change will be essential in estimating changes in the significant items related to sales. These include the revenues that the company registered the labor costs of the company and rent. The use of percentages of another line item will necessitate the base assumptions in making forecasts. These two will feature in the development of projections for Texas Roadhouse Inc. Applying these to the past performance of the company will aid in the forward-looking analysis (Robinson et al. 2012).
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