Topics Covered. Objectives. Chapter 18 Financial Planning
|
|
- Drusilla Myra Cain
- 8 years ago
- Views:
Transcription
1 Chapter 18 Financial Planning Topics Covered What is Financial Planning? Financial Planning Models Planners Beware External Financing and Growth Objectives Forecast Financial Statements with the Percentage of Sales Approach With a simple (strict) model With a better model to determine External Financing Needed. Discuss Limitations of Percentage of Sales Approach. Determine Internal and Sustainable Growth Rate. 1
2 Financial Planning The Financial Planning Process Analyzing the investment and financing choices open to the firm. Projecting the future consequences of current decisions. Deciding which alternatives to undertake. Measuring subsequent performance against the goals set forth in the financial plan. Financial Planning Planning Horizon - Time horizon for a financial plan. Departments are often asked to submit 3 alternatives Optimistic case = best case Expected case = normal growth Pessimistic case = retrenchment Financial plans help managers ensure that their financial strategies are consistent with their capital budgets. They highlight the financial decisions necessary to support the firm s production and investment goals. Financial Planning Why Build Financial Plans? Contingency planning Considering options Forcing consistency 2
3 Financial Planning Models Inputs Planning Model Outputs Inputs - Current financial statements. Forecasts of key variables (such as sales or interest rates). Planning Model - Equations specifying key relationships. Outputs - Projected financial statements (pro forma). Financial ratios. Sources and uses of funds. Financial Planning Models Pro Formas - Projected or forecasted financial statements. Percentage of Sales Model - Planning model in which sales forecasts are the driving variable and most other variables are proportional to sales. Balancing Item - Variable that adjusts to maintain the consistency of a financial plan. Also called plug. Example of Simple Percentage of Sales Model: Indigo Inc. Here are abbreviated financial statements for Indigo Inc Income Statement Sales $5,000 Costs $4,000 Net Income $1, Balance Sheet Assets $4,000 Debt $1,000 Equity $3,000 Total $4,000 Total $4,000 If sales increase by 30% in 2004 and the company uses a strict (simple) %age of sales model where all income statement and balance sheet items increase by the same rate as sales, what must be the plug? What will be its value? 3
4 Example: Indigo Inc. projections 2004 Income Statement Sales 5000(1.3) = 6,500 Cost 4000(1.3) = 5,200 Net Income 1, Balance Sheet Assets4000(1.3) = 5,200 Debt 1000(1.3) = 1,300 Equity 3000(1.3) = 3,900 Total 5,200 Increase in Equity is 900, which is less than projected income of 1,300 meaning the equity increase can be funded through retained earnings. This means Indigo Inc. can pay out $400 in dividends ( ). What if Indigo Inc. wants to payout 50% of net income as dividends? Income Statement Sales Sales 5000(1.3) = = 6,500 6,500 Cost Cost4000(1.3) = = 5,200 5,200 Net Net Income 1,300 1,300 Dividends(50%) 650 Retained Earnings Balance Sheet Assets 4000(1.3) = 5,200 Debt 1000(1.3) = 1,300 or 1550 Equity 3000(1.3) = 3,900 or 3650 Total 5,200 Now, Indigo has to issue $250 ( ) of new stock (2004 equity = 3,900) to maintain their original 2003 financing mix OR issue an additional $250 in new debt (2004 debt = 1,550) which would increase their debt-equity ratio. An Improved Financial Forecasting Model 1) Project sales revenues and expenses. 2) Estimate current assets and fixed assets necessary to support projected sales. Percent of sales forecast: increase at sales growth rate. 3) Estimate potential internal financing: noninterest bearing current liabilities and retained earnings 4) Difference between 2 and 3 is required external financing needed. 4
5 Our Example: Zippy Disks Suppose this year s sales will total $20 million. Next year, we forecast sales of $25 million, an increase of 25% Net income should be 10% of sales. Dividends should be 40% of earnings. Our task: forecast balance sheet and determine external financing needed (debt and/or stock). Zippy Disks Current Balance Sheet Assets Current Assets $6m Fixed Assets $10m Total Assets $16m Liab. and Equity Accounts Payable $4m Current Liabilities $4m Long Term Debt $4m Total Liabilities $8m Common Stock $3m Retained Earnings $5m Equity $8m Total Liab. & Equity $16m Zippy s projected Net Income and Dividends Next year, we forecast sales of $25 million, an increase of 25% Net income should be 10% of sales. Dividends should be 40% of earnings. Projected Net Income = $25m x 10% = $2.5m Projected Dividends = $2.5m x 40% = $1.0m Projected additional retained earnings = Net Income Dividends = $2.5m - $1.0m = $1.5m 5
6 This year Next year Assets Current Assets $6m x 1.25= $7.5m Fixed Assets $10m x 1.25= $12.5m Total Assets $16m x 1.25= $20.0m Liab. and Equity Accounts Payable $4m x 1.25= $5.0m Current Liabilities $4m x 1.25= $5.0m Long Term Debt $4m same $4.0m Total Liabilities $8m $9.0m Common Stock $3m same $3.0m Retained Earnings $5m + 1.5m= $6.5m Equity $8m $9.5m Total Liab. & Equity $16m $18.5m Oh, no! Here come the Accounting Police! Projected Assets $20.0m Projected Liabilities & Equity $18.5m External Financing Needed $1.5m Zippy must decide how to raise this financing. Options: short and/or long term borrowing, sell new common stock, cut dividends. Let s assume Zippy will borrow all financing needed through Long Term Debt. Here s Zippy s complete projected balance sheet. This year Next year Assets Current Assets Whew! Now, $6m x 1.25= $7.5m Fixed Assets the Accy Police $10m x 1.25= $12.5m Total Assets will be happy! $16m x 1.25= $20.0m Liab. and Equity Accounts Payable $4m x 1.25= $5.0m Current Liabilities $4m x 1.25= $5.0m Long Term Debt $4m + 1.5m $5.5m Total Liabilities $8m $10.5m Common Stock $3m same $3.0m Retained Earnings $5m + 1.5m= $6.5m Equity $8m $9.5m Total Liab. & Equity $16m $20.0m 6
7 Zippy s Forecast Post-mortem Original total assets = $16m, original total debt = $8m Original total debt ratio: 50% Projected total assets = $20m, projected total debt = $10.5m. Projected total debt ratio = 52.5% Raising the 1.5m external financing needed through debt would increase Zippy s debt ratio. If Zippy wanted to maintain their original 50% debt ratio, total debt could only be $10m. The other $0.5 of needed financing would come from equity: selling new stock or paying less dividends. Predicting External Financing Needs: A Formula Approach The required external financing (EFN) formula approach gives the same result as our first approach, but focuses on the projected changes in the balance sheet. EFN = Proj. Inc. in Net Assets Proj Retained Earnings Proj. Inc in Net Assets = Assets-Current Liab./Sales x Chg in sales or Net Assets x growth rate in Sales Proj. RE = NPM x Proj Sales x (1 d), where d is dividend payout ratio = Divs/Net Income Zippy s Original Net Assets = 16m-4m = 12m, g in sales = 25%, proj sales = 25m, NPM = 10%, d = 40% or 0.4 Proj RE = 25m(10%)(1-.4) = 1.5m EFN = 12m(.25) 1.5m = 3m 1.5m = $1.5m EFN dynamics Higher sales growth means more required external financing. Higher dividend payout means more required external financing. Higher net profit margin means less required external financing. 7
8 Planners Beware Many models ignore realities such as depreciation, taxes, etc. Percent of sales methods are not realistic because fixed costs exist. Most models generate accounting numbers not financial cash flows Adjustments must be made to consider these and other factors. The effects of other factors on the forecast of EFN. Excess capacity: Existence lowers EFN. Base stocks of assets: Leads to less-than-proportional asset increases, less EFN. Lumpy assets: Leads to large periodic EFN requirements, recurring excess capacity. External Financing & Growth Internal growth rate = maximum sales growth without any additional external financing. Internal growth rate = = retained earnings assets retained earnings net income x net income equity x equity assets Need assets net of non-interest bearing current liabilities. 8
9 Sustainable Rate of Growth The maximum sales growth rate a firm can have while maintaining its capital structure (financing mix). Sustainable growth rate = plowback ratio X ROE ROE = return on equity = net income/equity Let s return to Zippy s original info. Zippy Disks Current Balance Sheet Assets Current Assets $6m Original Fixed Assets $10m sales = $20m Total Assets $16m Liab. and Equity Net Profit Accounts Payable $4m Margin = 10% Current Liabilities $4m Dividend Long Term Debt $4m payout = 40% Total Liabilities $8m Common Stock $3m Plowback = 60% Retained Earnings $5m Equity $8m Total Liab. & Equity $16m Sustainable Growth rate for Zippy. Current Net income is 10% of $20m or $2m. Current Equity = $8m, net assets = 16m 4m = 12m Dividend payout ratio = 40% or 0.4, Plowback = 60% or 0.6 Internal g = retained earnings/net assets = 2m(.6)/12m = 10% Sustainable g = 2m/8m x (1 -.4) = 25% x.6 = 15% Our forecast for Zippy: 25% growth in sales (20m to 25m). 9
CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH
CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH Answers to Concepts Review and Critical Thinking Questions 5. The sustainable growth rate is greater than 20 percent, because at a 20 percent growth rate
More informationFinancial Planning and Growth. Background
Financial Planning and Growth (Text reference: Chapter 26) background detailed examples factors affecting growth AFM 271 - Financial Planning and Growth Slide 1 Background financial planning may be thought
More information11. Long term financial planning and growth (part 2)
1 11. Long term financial planning and growth (part 2) In these slides, we go into more detail on long-term planning. Topics include: Partial capacity and lumpy investment in fixed assets Interest and
More informationComputing Liquidity Ratios Current Ratio = CA / CL 708 / 540 = 1.31 times Quick Ratio = (CA Inventory) / CL (708 422) / 540 =.53 times Cash Ratio =
1 Computing Liquidity Ratios Current Ratio = CA / CL 708 / 540 = 1.31 times Quick Ratio = (CA Inventory) / CL (708 422) / 540 =.53 times Cash Ratio = Cash / CL 98 / 540 =.18 times 2 Computing Leverage
More informationCHAPTER 2 FINANCIAL STATEMENTS AND CASH FLOW
CHAPTER 2 FINANCIAL STATEMENTS AND CASH FLOW Solutions to Questions and Problems NOTE: All end-of-chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and
More informationLong-Term Financial Planning and Growth
Long-Term Financial Planning and Growth What is Financial Planning Firms must plan for both the short term and the long term. Short-term planning rarely looks further ahead than the next 12 months. It
More informationChapter 12 Financial Planning and Forecasting Financial Statements ANSWERS TO END-OF-CHAPTER QUESTIONS
Chapter 12 Financial Planning and Forecasting Financial Statements ANSWERS TO END-OF-CHAPTER QUESTIONS 12-1 a. The operating plan provides detailed implementation guidance designed to accomplish corporate
More informationWhat is Financial Planning
What is Financial Planning Firms must plan for both the short term and the long term. Short-term planning rarely looks further ahead than the next 12 months. It seeks to ensure that the firm has enough
More informationIn this presentation I will introduce some basic elements of financial forecasting and how they connect with the financial plan.
In this presentation I will introduce some basic elements of financial forecasting and how they connect with the financial plan. 1 The pro forma financial statements in the financial plan will include
More informationChapter 4. Long-Term Financial Planning and Growth. Overview of the Lecture. September 2004. What Is Financial Planning. Financial Planning Models
Chapter 4 Long-Term Financial Planning and Growth September 2004 Overview of the Lecture What Is Financial Planning Financial Planning Models The Percentage of Sales Approach xternal Financing and Growth
More informationCHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH
CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH Answers to Concepts Review and Critical Thinking Questions 1. Time trend analysis gives a picture of changes in the company s financial situation over
More informationNWC = current assets - current liabilities = 2,100
Questions and Problems Chapters 2,3 pp45-47 1. Building a balance sheet. Penguin Pucks, Inc., has current assets of $3,000, net fixed assets $6,000, current liabilities of $900, and long-term debt of $5,000.
More informationLecture 5 - Financial Planning and Forecasting
Lecture 5 - Financial Planning and Forecasting Strategy A company s strategy consists of the competitive moves, internal operating approaches, and action plans devised by management to produce successful
More informationCHAPTER 2 INTRODUCTION TO CORPORATE FINANCE
CHAPTER 2 INTRODUCTION TO CORPORATE FINANCE Solutions to Questions and Problems NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and
More informationCHAPTER 9. Financial Planning and Forecasting Financial Statements
CHAPTER 9 Financial Planning and Forecasting Financial Statements 1 Topics in Chapter Financial planning Additional Funds Needed (AFN) formula Forecasted financial statements Sales forecasts Percent of
More informationTIP If you do not understand something,
Valuing common stocks Application of the DCF approach TIP If you do not understand something, ask me! The plan of the lecture Review what we have accomplished in the last lecture Some terms about stocks
More informationFinancial Forecasting (Pro Forma Financial Statements)
Financial Modeling Templates Financial Forecasting (Pro Forma Financial Statements) http://spreadsheetml.com/finance/financialplanningforecasting_proformafinancialstatements.shtml Copyright (c) 2009, ConnectCode
More informationChapter 17 Financial Forecasting and Planning
Chapter 17 Financial Forecasting and Planning Slide Contents Learning Objectives 1. An Overview of Financial Planning 2. Developing a Long-term Financial Plan 3. Developing a Short-Term Financial Plan
More informationFinancial Planning for East Coast Yachts
Financial Planning for East Coast Yachts Prepared for East Coast Yachts Prepared by Dan Ervin, Mary-Ann Lawrence, Kevin Klepacki, Katie Wilson, Andrew Wright January 1, 2010 Table of Contents iii Table
More informationChapter 17: Financial Statement Analysis
FIN 301 Class Notes Chapter 17: Financial Statement Analysis INTRODUCTION Financial ratio: is a relationship between different accounting items that tells something about the firm s activities. Purpose
More informationICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION
ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION OCTOBER 2006 Table of Contents 1. INTRODUCTION... 3 2. FINANCIAL RATIOS FOR COMPANIES (INDUSTRY - COMMERCE - SERVICES) 4 2.1 Profitability Ratios...4 2.2 Viability
More informationChapter 3. Financial Planning and Growth SUMMARY EXECUTIVE. 3.1 What Is Financial Planning?
Chapter 3 Financial Planning and Growth EXECUTIVE SUMMARY Corporate financial planning establishes guidelines for change in the firm. These guidelines should include (1) an identification of the firm s
More informationChapter Financial Forecasting
Chapter Financial Forecasting PPT 4-2 Chapter 4 - Outline What is Financial Forecasting? 3 Financial Statements for Forecasting Constructing Pro Forma Statements Basis for Sales Projections Steps in a
More informationIncome Measurement and Profitability Analysis
PROFITABILITY ANALYSIS The following financial statements for Spencer Company will be used to demonstrate the calculation of the various ratios in profitability analysis. Spencer Company Comparative Balance
More informationChapter 9 Solutions to Problems
Chapter 9 Solutions to Problems 1. a. Cash and cash equivalents are cash in hand and in banks, plus money market securities with maturities of 90 days or less. Accounts receivable are claims on customers
More informationSolutions to Chapter 4. Measuring Corporate Performance
Solutions to Chapter 4 Measuring Corporate Performance 1. a. 7,018 Long-term debt ratio 0. 42 7,018 9,724 b. 4,794 7,018 6,178 Total debt ratio 0. 65 27,714 c. 2,566 Times interest earned 3. 75 685 d.
More informationPrimary Market - Place where the sale of new stock first occurs. Initial Public Offering (IPO) - First offering of stock to the general public.
Stock Valuation Primary Market - Place where the sale of new stock first occurs. Initial Public Offering (IPO) - First offering of stock to the general public. Seasoned Issue - Sale of new shares by a
More informationLong-Term Financial Planning and Growth
Long-Term Financial Planning and Growth CHAPTER 4 Boston Chicken Inc., operator and franchiser of Boston Market restaurants, was one of the great success stories of the early 1990s. The firm added restaurants
More informationKey Concepts and Skills Chapter 8 Stock Valuation
Key Concepts and Skills Chapter 8 Stock Valuation Konan Chan Financial Management, Spring 2016 Understand how stock prices depend on future dividends and dividend growth Be able to compute stock prices
More information* * * Chapter 15 Accounting & Financial Statements. Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall
Chapter 15 Accounting & Financial Statements Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall Bookkeeping vs. Accounting Bookkeeping Accounting The recording of business transactions.
More informationForecasting Financial Requirements
CHAPTER OUTLINE Spotlight: Planning for Growth (http://www.builtny.com) 1 The Purpose and Need for Financial Forecasting Describe the purpose and need for financial forecasting. Purpose of pro forma financial
More informationGBA 521 Midterm Review Dr. Markelevich
GBA 521 Midterm Review Dr. Markelevich Multiple Choice (3 points for each question) Identify the letter of the choice that best completes the statement or answers the question. Wynn Corp. Wynn Corp. reported
More informationAutomatic Data Processing, Inc. and Subsidiaries Consolidated Statements of Earnings (In millions, except per share amounts) (Unaudited)
Automatic Data Processing, Inc. and Subsidiaries Consolidated Statements of Earnings (In millions, except per share amounts) (Unaudited) 2006 (B) 2005 (C) 2006 (B) 2005 (C) Revenues, other than interest
More informationFinancial Formulas. 5/2000 Chapter 3 Financial Formulas i
Financial Formulas 3 Financial Formulas i In this chapter 1 Formulas Used in Financial Calculations 1 Statements of Changes in Financial Position (Total $) 1 Cash Flow ($ millions) 1 Statements of Changes
More informationUsing Accounts to Interpret Performance
Using s to Interpret Performance ing information is used by stakeholders to judge the performance and efficiency of a business Different stakeholders will look for different things: STAKEHOLDER Shareholders
More informationMASTER BUDGET - EXAMPLE
MASTER BUDGET - EXAMPLE Sales IN UNITS for the previous two months (of last quarter), as well as the sales forecast for next quarter are as follows: Sales Budget Units May sales (ACTUAL) 20 June sales
More informationTOPIC LEARNING OBJECTIVE
Topic Mapping 1 Transaction Analysis Understand the effect of various types of transactions on the accounting equation, accounting journal and accounting ledger. Concepts and Skills Accounting Equation
More informationReturn on Equity has three ratio components. The three ratios that make up Return on Equity are:
Evaluating Financial Performance Chapter 1 Return on Equity Why Use Ratios? It has been said that you must measure what you expect to manage and accomplish. Without measurement, you have no reference to
More informationBudget types. CH 6: Budgets HOW DO YOU COME UP WITH THE NUMBERS? Budget Periods WHY BUDGET?
CH 6: s WHY? PLANNING COMMUNICATION CONTROL:PERFORMANCE EVALUATION MOTIVATING types Master» Operating Sales, Production [purchases], Operating Expense. ProForma Income Statement» Financial Cash, Capital,
More informationFINANCIAL MANAGEMENT
100 Arbor Drive, Suite 108 Christiansburg, VA 24073 Voice: 540-381-9333 FAX: 540-381-8319 www.becpas.com Providing Professional Business Advisory & Consulting Services Douglas L. Johnston, II djohnston@becpas.com
More informationEMERSON AND SUBSIDIARIES CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)
CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) TABLE 1 Quarter Ended March 31, Percent Change Net Sales $ 5,854 $ 5,919 1% Costs and expenses: Cost of sales 3,548 3,583
More informationHow To Calculate Financial Leverage Ratio
What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? HOCK international - 2004 1 HOCK international - 2004 2 How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated? HOCK
More informationUnderstanding A Firm s Financial Statements
CHAPTER OUTLINE Spotlight: J&S Construction Company (http://www.jsconstruction.com) 1 The Lemonade Kids Financial statement (accounting statements) reports of a firm s financial performance and resources,
More informationa. venture financing typically goes to established large companies with impressive histories
Review of Lecture 6 Quiz and Test Questions 1. BS17 Which statement about a venture capitalist is most accurate? a. venture financing typically goes to established large companies with impressive histories
More informationFinancial Analysis. Clarkson Lumber Company
Financial Analysis Clarkson Lumber Company Pro Forma Analysis Basic approach is to pick points in time (year end, quarter end, month end), determine where cash is expected to be tied up at these points
More informationPreparing a Successful Financial Plan
Topic 9 Preparing a Successful Financial Plan LEARNING OUTCOMES By the end of this topic, you should be able to: 1. Describe the overview of accounting methods; 2. Prepare the three major financial statements
More informationAdvanced Placement (AP) Accounting
Advanced Placement (AP) Accounting The Advanced Placement (AP) Accounting Course is a full academic year course. The course is based on high school teachers having 120 contact hours with students from
More informationChpater-4: Solutions to Problems
Chpater-4: Solutions to Problems P4-1. Depreciation LG 1; Basic Year Depreciation Schedule Percentages Cost(1) from Table 4.2 (2) Depreciation [(1) (2)] (3) Asset A 1 $17,000 33% $ 5,610 2 $17,000 45 7,650
More informationREC 3033 Commercial Recreation and Tourism. Class Week 12. The Dollars and Sense of Your Business. Preparation of Proforma Statements
REC 3033 Commercial Recreation and Tourism Class Week 12 The Dollars and Sense of Your Business Tourism operators not making large sums of money Tourism Canada Study (1995) average adventure travel operator
More informationINCOME STATEMENT. BALANCE SHEET (Beginning) WHAT'S MY CASH FLOW? Cash Flow Statements. For the 12 Months Ending 12/31/2005.
Cash Flow Statements INCOME STATEMENT Revenue $ 800,000 Operating Expenses $ 770,000 Depreciation expense $ 20,000 Total expenses $ 790,000 Net Income $ 10,000 Explanation: Using the Income Statement,
More informationFinancial Ratios Used In GLO-BUS
Financial Ratios Used In GLO-BUS Profitability Ratios (as reported on pages 2 and 6 of the GLO-BUS Statistical Review) Earnings per share (EPS) is defined as net income divided by the number of shares
More information6. Financial Planning. Break-even. Operating and Financial Leverage.
6. Financial Planning. Break-even. Operating and Financial Leverage. Financial planning primarily involves anticipating the impact of operating, investment and financial decisions on the firm s future
More informationFinancial Statements and Ratios: Notes
Financial Statements and Ratios: Notes 1. Uses of the income statement for evaluation Investors use the income statement to help judge their return on investment and creditors (lenders) use it to help
More informationPROFITCENTS ANALYTICAL PROCEDURES EXPECTED VALUE METHODOLOGY
PROFITCENTS ANALYTICAL PROCEDURES EXPECTED VALUE METHODOLOGY INTRODUCTION This document includes an analysis of the projection methodology used in ProfitCents Analytical Procedures in calculating expectations
More informationWorking Capital Concept & Animation
Working Capital Concept & Animation Meaning A measure of both a company's efficiency and its short-term financial health. The working capital is calculated as: Working Capital = Current Assets Current
More informationChapter 6 Statement of Cash Flows
Chapter 6 Statement of Cash Flows The Statement of Cash Flows describes the cash inflows and outflows for the firm based upon three categories of activities. Operating Activities: Generally include transactions
More informationFinance Master. Winter 2015/16. Jprof. Narly Dwarkasing University of Bonn, IFS
Finance Master Winter 2015/16 Jprof. Narly Dwarkasing University of Bonn, IFS Chapter 2 Outline 2.1 Firms Disclosure of Financial Information 2.2 The Balance Sheet 2.3 The Income Statement 2.4 The Statement
More informationCompany Financial Plan
Financial Modeling Templates http://spreadsheetml.com/finance/companyfinancialplan.shtml Copyright (c) 2009-2014, ConnectCode All Rights Reserved. ConnectCode accepts no responsibility for any adverse
More information14. Calculating Total Cash Flows.
14. Calculating Total Cash Flows. Greene Co. shows the following information on its 2008 income statement: Sales = $138,000 Costs = $71,500 Other expenses = $4,100 Depreciation expense = $10,100 Interest
More informationConsolidated Interim Earnings Report
Consolidated Interim Earnings Report For the Six Months Ended 30th September, 2003 23th Octorber, 2003 Hitachi Capital Corporation These financial statements were prepared for the interim earnings release
More informationDiscussion Board Articles Ratio Analysis
Excellence in Financial Management Discussion Board Articles Ratio Analysis Written by: Matt H. Evans, CPA, CMA, CFM All articles can be viewed on the internet at www.exinfm.com/board Ratio Analysis Cash
More informationMBAP 6061 Managerial Finance Exam 1 Thursday, September 30, 2010. Dr. William A. Dowling
MBAP 6061 Managerial Finance Exam 1 Thursday, September 30, 2010 Dr. William A. Dowling Name You are to provide answers to the following questions. 1. What advantages does the corporate form of organization
More informationBusiness Plan Planning Service Financial Analyses and Projections
Business Plan Planning Service Financial Analyses and Projections Financials Included With Every Ceo Resource Plan These are the financial analyses and projections that are included with all plans developed
More informationRatios from the Statement of Financial Position
For The Year Ended 31 March 2007 Ratios from the Statement of Financial Position Profitability Ratios Return on Sales Ratio (%) This is the difference between what a business takes in and what it spends
More information1. Operating, Investment and Financial Cash Flows
1. Operating, Investment and Financial Cash Flows Solutions Problem 1 During 2005, Myears Oil Co. had gross sales of $1 000,000, cost of goods sold of $400,000, and general and selling expenses of $300,000.
More informationRatio Analysis. A) Liquidity Ratio : - 1) Current ratio = Current asset Current Liability
A) Liquidity Ratio : - Ratio Analysis 1) Current ratio = Current asset Current Liability 2) Quick ratio or Acid Test ratio = Quick Asset Quick liability Quick Asset = Current Asset Stock Quick Liability
More informationFeatures of Common Stock. The Stock Markets. Features of Preferred Stock. Valuation of Securities: Stocks
Valuation of Securities: Stocks Econ 422: Investment, Capital & Finance University of Washington Eric Zivot Fall 27 January 31, 27 Features of Common Stock Voting rights (Cumulative vs. Straight) Proxy
More informationAdvanced Corporate Finance. 2. Financial Planning, from Accounting to Free Cash Flows
Advanced Corporate Finance 2. Financial Planning, from Accounting to Free Cash Flows Objectives of the session 1. Show how to use accounting information to compute cash flows 2. Understand and compute
More informationEquity Valuation. Lecture Notes # 8. 3 Choice of the Appropriate Discount Rate 2. 4 Future Cash Flows: the Dividend Discount Model (DDM) 3
Equity Valuation Lecture Notes # 8 Contents About Valuation 2 2 Present-Values 2 3 Choice of the Appropriate Discount Rate 2 4 Future Cash Flows: the Dividend Discount Model (DDM) 3 5 The Two-Stage Dividend-Growth
More informationUNDERSTANDING FINANCE AND MEMBER EQUITY MY EXPERIENCE AGENDA
UNDERSTANDING FINANCE AND MEMBER EQUITY A Special Presentation for the Strengthening Cooperation Workshop February 21, 2006 by Brian Henehan Senior Extension Associate Cornell Cooperative Enterprise Program
More informationWrap-up of Financing. Katharina Lewellen Finance Theory II March 11, 2003
Wrap-up of Financing Katharina Lewellen Finance Theory II March 11, 2003 Overview of Financing Financial forecasting Short-run forecasting General dynamics: Sustainable growth. Capital structure Describing
More informationA Simple Model. The Accounting Equation
An introduction to the accounting equation in the context of building a financial model. This series introduces the financial statements in the context of a financial model. NOTES TO ACCOMPANY VIDEOS These
More informationFinancing Entrepreneurial Ventures Part 1 Financial Plan & Statements
Financing Entrepreneurial Ventures Part 1 Financial Plan & Statements Barbara Peitsch Program Director, Univ. of Michigan Peter Scott Professor of Entrepreneurship/Consultant August 2015 Economic Empowerment
More informationCourse 1: Evaluating Financial Performance
Excellence in Financial Management Course 1: Evaluating Financial Performance Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a basic understanding of how to use ratio analysis for evaluating
More informationFinancial Ratios Used In BSG-Online
Financial Ratios Used In BSG-Online Profitability Ratios (as reported on pages 2 and 5 of the Footwear Industry Report) Earnings per share (EPS) is defined as net income divided by the number of shares
More informationReview for Exam 3. Instructions: Please read carefully
Review for Exam 3 Instructions: Please read carefully The exam will have 25 multiple choice questions and 5 work problems. You are not responsible for any topics that are not covered in the lecture note
More informationModule 2: Preparing for Capital Venture Financing Building Pro-Forma Financial Statements
Module 2: Preparing for Capital Venture Financing Building Pro-Forma Financial Statements Module 2: Preparing for Capital Venture Financing Building Pro-Forma Financial Statements TABLE OF CONTENTS 1.0
More informationMultiple Choice Questions (45%)
Multiple Choice Questions (45%) Choose the Correct Answer 1. The following information was taken from XYZ Company s accounting records for the year ended December 31, 2014: Increase in raw materials inventory
More informationONESTEEL LIMITED PRO-FORMA FINANCIAL INFORMATION FOR THE MERGED GROUP IN RESPECT OF THE MERGER ONESTEEL LIMITED AND SMORGON STEEL GROUP LIMITED
ONESTEEL LIMITED PRO-FORMA FINANCIAL INFORMATION FOR THE MERGED GROUP IN RESPECT OF THE MERGER OF ONESTEEL LIMITED AND SMORGON STEEL GROUP LIMITED For further information: Mark Gell General Manager, Corporate
More informationChapter 8. Stock Valuation Process. Stock Valuation
Stock Valuation Process Chapter 8 Stock Valuation: Investors use risk and return concept to determine the worth of a security. In the valuation process: The intrinsic value of any investment equals the
More informationChapter 14. Web Extension: Financing Feedbacks and Alternative Forecasting Techniques
Chapter 14 Web Extension: Financing Feedbacks and Alternative Forecasting Techniques I n Chapter 14 we forecasted financial statements under the assumption that the firm s interest expense can be estimated
More informationBus 300 Lemke Midterm Exam September 22, 2004
Bus 300 Lemke Midterm Exam September 22, 2004 The balance sheet and income statement on the next page for questions #1 through #7: (5 pts) 1. What is the firm s operating cash flow for 2000? 623 (5 pts)
More information] (3.3) ] (1 + r)t (3.4)
Present value = future value after t periods (3.1) (1 + r) t PV of perpetuity = C = cash payment (3.2) r interest rate Present value of t-year annuity = C [ 1 1 ] (3.3) r r(1 + r) t Future value of annuity
More informationE2-2: Identifying Financing, Investing and Operating Transactions?
E2-2: Identifying Financing, Investing and Operating Transactions? Listed below are eight transactions. In each case, identify whether the transaction is an example of financing, investing or operating
More informationConference call on 2014 half year results 13 August 2014
Conference call on 2014 half year results 13 August 2014 IMCD IMCD Group N.V. Disclaimer Forward looking statements This half year report contains forward looking statements. These statements are based
More informationThe Basic Framework of Budgeting
Master Budgeting 1 The Basic Framework of Budgeting A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period. 1. The act of
More informationTeacher Resource Bank
Teacher Resource Bank GCE Accounting Other Guidance: ACCN2 Update on IAS ACCN3 Updates on IAS (July 2012). The Assessment and Qualifications Alliance (AQA) is a company limited by guarantee registered
More informationCHAPTER 5. RATIO ANALYSIS, FINANCIAL PLANNING AND FINANCIAL ANALYSIS
CHAPTER 5. RATIO ANALYSIS, FINANCIAL PLANNING AND FINANCIAL ANALYSIS The financial statements discussed in Chapter 4 provide valuable information about a firm s financial and business health. Ratio analysis
More informationEngineering Economics 2013/2014 MISE
Problem: JS, Inc. shows the following accounting records for 2011: Sales commissions 15000 Beginning merchandise inventory 16000 Ending merchandise inventory 9000 Sales 185000 Advertising 10000 Purchases
More informationAchievement of Market-Friendly Initiatives and Results Program (AMIR 2.0 Program) Funded by U.S. Agency for International Development
Achievement of Market-Friendly Initiatives and Results Program (AMIR 2.0 Program) Funded by U.S. Agency for International Development Equity Analysis, Portfolio Management, and Real Estate Practice Quizzes
More informationTotal shares at the end of ten years is 100*(1+5%) 10 =162.9.
FCS5510 Sample Homework Problems Unit04 CHAPTER 8 STOCK PROBLEMS 1. An investor buys 100 shares if a $40 stock that pays a annual cash dividend of $2 a share (a 5% dividend yield) and signs up for the
More informationProspective Analysis REVIEW
Prospective Analysis REVIEW Prospective analysis is the final step in the financial statement analysis process. It includes forecasting of the balance sheet, income statement and statement of cash flows.
More informationWeb Extension: Financing Feedbacks and Alternative Forecasting Techniques
19878_09W_p001-009.qxd 3/10/06 9:56 AM Page 1 C H A P T E R 9 Web Extension: Financing Feedbacks and Alternative Forecasting Techniques IMAGE: GETTY IMAGES, INC., PHOTODISC COLLECTION In Chapter 9 we forecasted
More informationFSA Note: Summary of Financial Ratio Calculations
FSA Note: Summary of Financial Ratio Calculations This note contains a summary of the more common financial statement ratios. A few points should be noted: Calculations vary in practice; consistency and
More informationMBA Financial Management and Markets Exam 1 Spring 2009
MBA Financial Management and Markets Exam 1 Spring 2009 The following questions are designed to test your knowledge of the fundamental concepts of financial management structure [chapter 1], financial
More informationCHAPTER 2 FINANCIAL STATEMENTS, TAXES AND CASH FLOW
CHAPTER 2 FINANCIAL STATEMENTS, TAXES AND CASH FLOW Answers to Concepts Review and Critical Thinking Questions 1. Liquidity measures how quickly and easily an asset can be converted to cash without significant
More informationCHAPTER 2 ACCOUNTING STATEMENTS, TAXES, AND CASH FLOW
CHAPTER 2 ACCOUNTING STATEMENTS, TAXES, AND CASH FLOW Answers to Concepts Review and Critical Thinking Questions 1. True. Every asset can be converted to cash at some price. However, when we are referring
More informationShort Term Finance and Planning. Sources and Uses of Cash
Short Term Finance and Planning (Text reference: Chapter 27) Topics sources and uses of cash operating cycle and cash cycle short term financial policy cash budgeting short term financial planning AFM
More informationThe Basics of Accounting ACCT 201
The Basics of Accounting ACCT 201 Content Accounting definition Accounting equation Accounting elements Asset, Liabilities, & Equity Transactions Accounts Receivable vs Accounts Payable Retained Earnings
More information