FIN 3140 Module 4 Forecasting Problems Example

Course	FIN-3140 Small Business Finance
Module	Module 4
Paper type	Written assignment 4: forecasting
Length	About 593 words, 5 pages
Format	APA 7 student paper
School	Thomas Edison State University
Program	B.S.B.A. in Finance
Updated	October 2026

Free sample paper for FIN 3140 Module 4

Seventy-Four Passengers a Trip: Forecasting Cape Point Whale Watch's 2026 Season

Student Name

B.S.B.A. in Finance, Thomas Edison State University

FIN-3140: Small Business Finance

Mentor Name

Month Day, Year

What this page is doingThe title names the passenger assumption that drives the forecast. The company and its figures are a composite.

Seventy-Four Passengers a Trip: Forecasting Cape Point Whale Watch's 2026 Season

Problem 1: The Sales Forecast

Rather than apply a single growth rate to last year's revenue, the forecast builds revenue from the drivers the owner can observe and influence (Adelman & Marks, 2014). Petersen and Rajan (1994) found that the length of a small firm's relationship with its bank improves its access to credit, which matters when the forecast shows a need for outside funds.

The passenger assumption rests on two facts: advance bookings for 2026 are 12 percent ahead of the same date last year, and a new partnership with two Cape May hotels adds weekday groups. The $2 fare increase matches what nearby operators charged in 2025.

Revenue line	2025	2026 assumption	2026 forecast
Whale and dolphin cruises	300 trips × 70 × $42 = $882,000	300 trips, 74 passengers, $44 fare	$976,800
Sunset cruises	60 × 90 × $35 = $189,000	64 trips, 90 passengers, $36	207,360
Charters	25 × $3,200 = $80,000	28 at $3,300	92,400
Concessions	$96,000	8.3% of ticket revenue, as in 2025	106,470
Total	$1,247,000	\| $1,383,030

Problem 2: Projecting the Statements

The percent-of-sales method assumes that costs and operating assets that move with sales keep their 2025 ratios, while fixed costs and financing items are projected individually. Crew, fuel, platform fees and concession costs are treated as variable at their 2025 share of revenue, 45.8 percent together; insurance, dock, maintenance, marketing, administration, owner's salary and depreciation are projected individually at $471,200, including a 5 percent insurance increase and depreciation on the upgrade.

Current assets other than cash are projected at their 2025 share of revenue, and spontaneous liabilities, payables, accrued wages and customer deposits, rise with sales.

Projected income statement, 2026	Amount
Revenue	$1,383,030
Variable costs, 45.8%	(633,210)
Fixed costs and depreciation	(471,200)
Operating income	278,620
Interest	(51,000)
Income before owner-level taxes	$227,620

What this page is doingSeparating variable from fixed costs before projecting, instead of scaling every line with sales, keeps the forecast from overstating costs in a business whose expenses are mostly fixed.

Problem 3: External Financing Needed

The owner plans a $60,000 upgrade, a new public address system, a hydrophone so passengers can hear the whales and updated life-saving equipment, and must repay $92,000 of loan principal. Using the projected figures:

The need is small and could be met by financing the upgrade through the equipment vendor or by reducing distributions by about $22,000.

Sources and uses, 2026	Amount
Income before owner taxes	$227,620
Add back depreciation	97,000
Increase in spontaneous liabilities	9,000
Increase in operating current assets	(5,000)
Upgrade	(60,000)
Loan principal	(92,000)
Owner distributions, including tax on pass-through income	(190,000)
Change in cash before new financing	(13,380)
Minimum year-end cash target increase	(8,000)
External financing needed	about $21,000

Problem 4: Sensitivity

If passengers average 66 a trip instead of 74, about 10 percent fewer, cruise revenue falls by about $105,600 and concession revenue by about $8,800. With variable costs falling by about $52,400, income before taxes drops by about $62,000, and external financing needed rises to about $83,000 if distributions are unchanged. The forecast is therefore most sensitive to passenger counts, which is why the owner should track weekly bookings against the plan from March and decide on the upgrade's timing by late April.

Problem 5: Why Forecast at All?

A forecast is a planning tool, not a prediction. It tells the owner how much the business can safely distribute, when to arrange credit and which assumptions to watch. Graham and Harvey (2001) found that managers of all sizes rely heavily on simple methods and rules of thumb; for a small business, a driver-based forecast with a sensitivity test is both simple and far more useful than a single growth rate.

References

Adelman, P. J., & Marks, A. M. (2014). Entrepreneurial finance (6th ed.). Pearson.

Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2-3), 187-243. https://doi.org/10.1016/S0304-405X(01)00044-7

Petersen, M. A., & Rajan, R. G. (1994). The benefits of lending relationships: Evidence from small business data. Journal of Finance, 49(1), 3-37. https://doi.org/10.1111/j.1540-6261.1994.tb04418.x

Reading the FIN 3140 Module 4 assignment instructions

Module 4, Forecasting, carries one of FIN-3140's six written assignments, each a set of questions and problems sharing 36 percent of the grade. Expect to forecast sales, project the income statement and balance sheet, often with the percent-of-sales method, compute external financing needed and explain the assumptions behind the forecast. A sensitivity test or scenario is a common final part. Your own problems will bring their own figures. Expect to forecast sales and build pro forma statements that show how much outside financing the business will need. Many versions supply last year's statements and a growth assumption.

Inside the FIN 3140 Module 4 example

Problem 1 builds the sales forecast line by line from passengers, trips and fares, with the evidence behind each assumption. Problem 2 separates variable from fixed costs and projects the income statement. Problem 3 sets out sources and uses of cash to find external financing needed, with two practical ways to meet it. Problem 4 tests the forecast against fewer passengers, and Problem 5 explains why a simple driver-based forecast is worth doing. The forecast ties the financing need to the seasonal low point in cash. A sensitivity line shows how the financing need changes if sales fall short.

Where the marks sit in the FIN 3140 Module 4 rubric

Forecasting problems are graded from 0 to 100 within the 36 percent that FIN-3140's written assignments carry. Mentors look for a sales forecast grounded in stated assumptions, statements projected with a consistent method, a correct external financing calculation and evidence that the student understands which assumptions matter most. A sensitivity test that changes one key driver and traces the effect through to financing needs shows the judgment the module aims to build. Mentors check that assumptions are stated, statements balance and the financing need is clearly identified. Interpretation of the gap in plain words earns credit. Assumptions taken from the business's own history are more convincing than round guesses. Forecasts that state each assumption and test a weak season show the owner and the bank how much financing may really be needed.

FIN 3140 Module 4 help: mistakes that cost marks

Forecast problems lose credit for applying one growth rate to every line, for treating fixed costs as if they rose with sales and for computing external financing needed without including debt repayment or owner distributions. Build sales from drivers you can defend. Separate variable and fixed costs. Include every use of cash. Test the most uncertain assumption and say when the owner should decide. A free first sample of your own FIN-3140 Module 4 problems is available on request. State every assumption in a table, then let the balance sheet show the financing gap. Check that the forecast balance sheet balances. Say how the owner should fund the gap, such as a seasonal line or retained earnings.

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More FIN 3140 and B.S.B.A. in Finance sample papers

FIN 3140 Module 4 questions, answered

Where can I find a free FIN 3140 Module 4 sample paper?

The whale-watching company problem set above builds a driver-based sales forecast, projects the statements, computes external financing needed and tests sensitivity to passengers.

What is the percent-of-sales method?

A forecasting method that projects items that vary with sales at their historical share of sales, while projecting fixed items and financing separately.

How do you calculate external financing needed?

Compare the cash the business will generate with all planned uses, including investment, debt repayment and distributions; the shortfall must be financed.

Why build a sales forecast from drivers?

Because drivers such as customers, prices and volume can be observed and tested, making the forecast easier to defend and update.

What is a sensitivity test in forecasting?

Changing one key assumption to see how much the forecast's results, such as profit or financing needs, change.

FIN 3140 Module 4 Written Assignment: Forecasting Sales, Statements and Financing Needs Example