Reference no: EM132399596

Corporate scenarios are pro forma (estimated future) balance sheets and income statements that forecast the effect each alternative strategy and its various programs will likely have on division and corporate return on investment.

If, for example, industry scenarios suggest the probable emergence of a strong market demand in a specific country for certain products, a series of alternative strategy scenarios can be developed. The alternative of acquiring another firm having these products in that country can be compared with the alternative of a green-field development (e.g., building new operations in that country). Using three sets of estimated sales figures (optimistic, pessimistic, and most likely) for the new products over the next five years, the two alternatives can be evaluated in terms of their effect on future company performance as reflected in the company's probable future financial statements. Pro forma balance sheets and income statements can be generated with spreadsheet software, such as Excel, on a personal computer. Pro forma statements are based on financial and economic scenarios

Discuss the steps needed to construct a corporate scenario