Financial Forecasting and Planning
Financial Forecasting and Planning
Financial Forecasting and Planning
Financial Forecasting
and Planning
Learning Objectives
1. Understand the goals of financial planning.
2. Use the percent of sales method to forecast the
financing requirements of a firm including its
discretionary financing needs.
3. Prepare a cash budget and use it to evaluate the
amount and timing of a firm’s short-term
financing requirements.
An Overview of Financial Planning
What is the primary objective of preparing financial
plans?
To estimate the future financing requirements in advance of
when the financing will be needed.
Using the pro forma statements we can extract the cash flow
requirements of the firm.
Financial Forecasting Example
Step 1: Forecast Revenues and Expenses
Step 3: Solve
1
2
Growth Rate
Sales
40%
$7,000,000.00
3 Net Income
Performa Balance Sheet for 2011
Multiple Computation
4 Current Assets 0.20 $1,400,000.00
13 Paid-in-capital $200,000.00