From the course: Financial Analysis: Making Business Projections
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Determining which gross-margin profile to use - Microsoft Excel Tutorial
From the course: Financial Analysis: Making Business Projections
Determining which gross-margin profile to use
- In order to forecast gross margin you need to be able to do it at a product level. To do so you first need to know what gross margin baseline you will be using. In that matter there are two options available to you. The first one is to use the previous year gross margin byproduct and assume it will remain the same in the coming year. The second one is to assume it will be different. That it will be higher or lower. It could be different from the previous year, if for example you know that your cost of production will increase or decrease. It could also be that you give a lot of customer discounts, and that this year you would like to reduce those discounts. Maybe you have given a lot of discounts to acquire new customers, and that you would like to acquire customers at a slower pace this year. Which should translate into lower discounts overall. To do so we first need to define a gross margin starting point. This needs to be a relevant starting point. So, when looking at your gross…
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