Lecture 2-Pro Formas

Lecture 2-Pro Formas - Financial Planning / Budgeting •...

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Unformatted text preview: Financial Planning / Budgeting • Estimate future revenues, expenses, assets, liabilities and cash flow • Primarily interested in an aggregate, long range forecast • Establish goals to motivate managers • Identify consequences and potential problems of current decisions • Proactive vs. Reactive Components of the Plan • Inputs • Current financial statements • Forecast of key variables (e.g. sales growth, interest rates etc.) • Model • Percentage of sales method + modifications • Outputs • Pro-forma financial statements • Projected cash flow statement • Key financial ratios What Drives the Planning Process? • Sales forecast • Growth in unit sales • Changes in price per unit • How to estimate sales growth • Historical growth rates: (e.g. average growth rate) • Economic analysis: (e.g. relate to GDP growth, interest rates, employment rates etc.) • Industry analysis (e.g. firm and competitor analysis, new product development, advertising and credit policy, production capacity) Why its important to be accurate...
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This note was uploaded on 03/15/2010 for the course BUSINESS MGT200 taught by Professor Manjuris during the Spring '08 term at Ryerson.

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Lecture 2-Pro Formas - Financial Planning / Budgeting •...

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