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minicase fin325 - necessary amount and timing of a...

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An important element of budgeting and planning is financial forecasting. Determining the finances of a business requires certain understanding of financial assumptions. The necessary steps for financial forecasting are important elements of projecting future growth, types, and methods of financing capital requirements, the impact of changes in interest rates and dividend payouts as well as alternatives to capital financing and its impact on debt ratio and equity. Financial planning is a method that will overall affect the financial investment decisions in Executive fruit’s financial planning. By using pro-formas, it is safe to say that a growth rate assumption for future years can be determined much easier. Many of the financial ratios indicate whether the company will be financially fit and healthy at the end of the planning period. A pro forma income statement and balance sheet is effective especially when determining the
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Unformatted text preview: necessary amount and timing of a company’s future cash requirements. A company uses the pro forma statement in the process of business planning and control. Since pro forma statements are presented in a standardized format, management uses them to compare and contrast alternative business plans. Determining the amount to be financed and the type of financing depends on the balancing item. The balance item could be either new debt or new equity. By arranging the operating statements with the financial statements, the management analyzes the projected results of the competing plans in order to decide which is best for the business. References Brealey, R. A., Myers, S. C., & Marcus, A. J. (2004). Fundamentals of corporate finance (4th ed.). [University of Phoenix Custom Edition e-text]. New York, New York; McGraw Hill/ Irwin. Retrieved May 28, 2007, from University of Phoenix, Resource....
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