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    Financial Planning and Forecasting

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    jambumbek
    Financial Planning and Forecasting

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    Financial Planning and Forecasting

    Uploaded by

    jambumbek
    16 views16 pages
    Financial Planning and Forecasting

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    © © All Rights Reserved

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    Financial Planning and Forecasting

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    16 views16 pages

    Financial Planning and Forecasting

    Uploaded by

    jambumbek
    Financial Planning and Forecasting

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 16

    Accounting and

    finance
    Choirunnisa Arifa

    17-1
    Financial Planning and
    Forecasting
     Forecasting sales
     Projecting the assets and internally generated
    funds
     Projecting outside funds needed
     Deciding how to raise funds

    17-2
    Strategic Planning
    • Mission statement
    • A condensed version of a firm’s strategic plan
    • Corporate scope
    • Defines a firm’s lines of business and geographic area of
    operation
    • Statement of corporate objectives
    • Sets forth specific goals to guide management
    • Corporate strategies
    • Broad approaches developed for achieving a firm’s goals

    17-3
    Strategic Planning
    • Operating plan
    • Provides management with detailed implementation guidance
    based on the corporate strategy to help meet the corporate
    objectives
    • Financial Plan
    • The document that includes assumptions, projected financial
    statements, and projected ratios and ties the entire planning
    process together

    17-4
    The Sales Forecast
    • The Financial Plan begins with a sales forecast, which starts
    with a review of sales during the past 5 years

    17-5
    The AFN Equation

    • The primary capital sources:


    • Spontaneously generated fund
    Funds that arise out of normal business operation from its suppliers,
    employees, and the government that reduce the firm’s need for external
    financing
    • Addition to retained earning
    The proportion of net income that is reinvested in the firm and is
    calculated as 1 minus the dividend payout ratio
    • AFN: additional fun needed
    The amount of external capital (interest-bearing debt, and preferred and
    common stock) needed to acquire the needed assets

    17-6
    The AFN Equation
    • The AFN equation shows the relationship of external funds needed
    by a firm to its projected increase in assets, the spontaneous
    increase in liabilities, and its increase in retained earnings

    • WHEN THE AFN IS ZERO, SUSTAINABLE GROWTH RATE SHOW THE


    MAXIMUM ACHIEVABLE GROWTH RATE WITHOUT THE FIRM HAVING
    TO RAISE EXTERNAL FUNDS

    17-7
    The AFN Equation
    • The capital Intensity Ratio (A0*/S0)
    • The ratio of assets required per dollar of sales
    • Excess capacity adjustment
    • Changes made to the existing asset forecast because
    the firm is not operating at full capacity

    17-8
    The AFN Equation

    17-9
    Forecasted financial statements

    17-10
    Forecasted financial statements

    17-11
    Forecasted financial statements

    17-12
    Forecasted financial statements

    17-13
    Using regression to improve
    forecasts

    17-14
    17-15
    17-16

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