Chapter 17 Powerpoint

Chapter 17 Powerpoint - CHAPTER 17 Financial Planning And...

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Unformatted text preview: CHAPTER 17 Financial Planning And Forecasting Forec asting and Financ ial Plann ing Probl ems with Rise over Run Financ ial Feed back Equ ation Me thod Econ omi es of Scal e Lump y Asse ts Spr eads heet Me thod FIN 3403- Bus iness Financ e Simp le Linear Reg ression Per cent of Sal es Forec asting Reg ression Ana lysis Additional Funds Needed Since a balance sheet must balance, an increase in total assets must be offset by an increase in total liabilities and shareholders’ equity. Additional funds needed are equal to the required increases in assets, less spontaneous increases in liabilities, minus increases in retained earnings. Equation Method AFN = (A * /S ) ∆ S - (L * /S ) ∆ S - M(S 1 )(1-d) where: A * = Increasing assets L * = Spontaneous liabilities M = Profit margin d = Dividend payout rate S = Current and projected sales Year 0 Starting Point Sales $5,000 100% Sales Costs-$3,000 60% Sales EBIT $2,000 Interest-$200 EBT $1,800 Taxes-$900 50% EBT Net Income $900 18% Sales Dividends $400 44% NI To Retained Earnings $500 Income Statement Year 0 Item Percent Year 0 Starting Point Cash $200 0.04 Sales Receivables $1,500 0.30 Sales Inventory $3,300 0.66 Sales Fixed Assets $2,000 0.40 Sales Total Assets $7,000 1.40 Sales Item Assets Year 0 Percent Year 0 Starting Point Accounts Payable $500 0.10 Sales Notes Payable $1,000 Accruals $500 0.10 Sales Long-term Debt $1,000 Common Stock $800 Retained Earnings $3,200 Total Liabilities & Equity $7,000 Item Percent Liabilities & Equity Year 0 AFN Example: Assumptions Firm expects sales to increase 40% from $5,000 to $7,000. Firm does not have excess capacity and will need to increase fixed assets. All assets will grow AFN Example: Assumptions Payables and accruals will grow proportionately with growth in sales. Profit margin will remain at 18%....
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This note was uploaded on 02/11/2011 for the course FIN 3403 taught by Professor Tapley during the Spring '06 term at University of Florida.

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Chapter 17 Powerpoint - CHAPTER 17 Financial Planning And...

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