The initial net sales were at $ 27, 828 at a forecast of 35% growth rate. Varying the rate of growth in the net sales by increasing the percentage value from 70% to 95% yields the following results. The external funding required remains constant with increasing rate in net sales at a constant rate of cost of goods sold.
Increasing Growth rate in sales from 70%-95% with constant cost of goods sold | |||
| Growth rate in sales | Net Sales | Cost of Goods sold | External Funding Required |
| 35% | $ 27,828 | $ 23,932 | $ 1,790 |
| 70% | $ 35,042 | $ 30,136 | $ 1,790 |
| 75% | $ 36,073 | $ 31,023 | $ 1,790 |
| 80% | $ 37,103 | $ 31,909 | $ 1,790 |
| 85% | $ 38,134 | $ 32,795 | $ 1,790 |
| 90% | $ 39,165 | $ 33,682 | $ 1,790 |
| 95% | $ 40,195 | $ 34,568 | $ 1,790 |
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Figure 1 Increasing Growth rate in sales from 70%-95% with constant cost of goods sold
If the rate of growth in net sales is reduced at the same constant rate of cost of goods sold at any given time, the net sales reduces at the same rate. The cost of goods sold also reduces if the rate of cost of goods sold is kept constant. However, the external funding required still remains the same as shown below.
Decreasing Growth rate in sales from 70%-45% with constant cost of goods sold | |||
| Growth rate in sales | Net Sales | Cost of Goods sold | External Funding Required |
| 70% | $ 35,042 | $ 30,136 | $ 1,790 |
| 65% | $ 34,011 | $ 29,250 | $ 1,790 |
| 60% | $ 32,981 | $ 28,363 | $ 1,790 |
| 55% | $ 31,950 | $ 27,477 | $ 1,790 |
| 50% | $ 30,920 | $ 26,591 | $ 1,790 |
| 45% | $ 29,889 | $ 25,704 | $ 1,790 |
Figure 2 Decreasing Growth rate in sales from 70%-45% with constant cost of goods sold
When the rate of growth in net sales is kept constant and the growth rate in cost of goods sold increased, the net sales remains constant while the cost of goods sold increases. The external funding also remains the same throughout.
Increasing cost of goods sold from 86%-98% with constant growth rate in sales | |||
| Growth rate in cost of goods sold | Net Sales | Cost of Goods sold | External Funding Required |
| 86% | $ 27,828 | $ 23,932 | 1790 |
| 88% | $ 27,828 | $ 24,488 | 1790 |
| 90% | $ 27,828 | $ 25,045 | 1790 |
| 92% | $ 27,828 | $ 25,601 | 1790 |
| 94% | $ 27,828 | $ 26,158 | 1790 |
| 96% | $ 27,828 | $ 26,714 | 1790 |
| 98% | $ 27,828 | $ 27,271 | 1790 |
Figure 3 Increasing cost of goods sold from 86%-98% with constant growth rate in sales
Finally, an analysis on the impact of reducing the rate of growth of cost of goods sold at a constant rate of net sales yielded the following results. The net sales remained constant while the cost of goods sold increased. In the same case, the external funding required remained constant.
Decreasing cost of goods sold from 86% to 74% with constant growth rate in sales | |||
| Growth rate in cost of goods sold | Net Sales | Cost of Goods sold | External Funding Required |
| 84% | $ 27,828 | $ 23,375 | $ 1,790 |
| 82% | $ 27,828 | $ 22,819 | $ 1,790 |
| 80% | $ 27,828 | $ 22,262 | $ 1,790 |
| 78% | $ 27,828 | $ 21,705 | $ 1,790 |
| 76% | $ 27,828 | $ 21,149 | $ 1,790 |
| 74% | $ 27,828 | $ 20,595 | $ 1,790 |
Figure 4 Decreasing cost of goods sold from 86% to 74% with constant growth rate in sales
Conclusion
The analysis shows a constant value in the external funding required by the company through out. Changes in the rate of sales while keeping the rate of goods sold at constant value does not affect the funding since there is a balance between the items sold and what is being consumed. However, there is no change in the rate of net sales when the rate of cost of goods is adjusted since if the cost of goods increases without increasing or reducing the rate of sales, the total number of sales will be the same. In general, adjusting one of the variables at a constant rate of the other will not affect the amount of funds required for investment, as seen from the graphs in the analysis.
