Financial planning and forecasting (brief version)

Financial planning and forecasting (brief version) -...

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Financial Planning and Forecasting 1
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2 What is Financial Planning and Forecasting? Financial planning and forecasting build financial models The result of a financial model is a forecast of future financing needs End result is a series of pro-forma financial statements (e.g., balance sheet) Helps to answer several key questions How much additional financing will the firm need? When will it need additional financing?
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3 An Example of the End Result of a Financial Model Look at the DuPont financial model on the next slide Data comes from a well-known HBS case focusing on debt policy and bond ratings (case takes place in 1982) Model is in the form of a sources and uses of funds statement Source of funds: Increase in a liability, net income, and depreciation Use of funds: Increase in an asset, cash dividends, and the repurchase of shares
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DuPont Financial Model (millions of dollars) Sources of Funds 1983 1984 1985 1986 1987 Total Net income 1,009 1,196 1,444 1,591 1,753 6,993 Depreciation 2,101 2,111 2,212 2,396 2,667 11,487 Funds from operations 3,110 3,307 3,656 3,987 4,420 18,480 Assets sold 600 600 600 0 0 1,800 Decrease in cash 199 (200) (200) (150) (150) (501) Other sources 74 135 135 135 135 614 Total sources 3,983 3,842 4,191 3,972 4,405 20,393 Uses of Funds 0 Dividends 571 658 794 896 964 3,883 Capital expenditures 2,767 3,386 4,039 4,202 4,667 19,061 Working capital 973 414 594 587 650 3,218 Other 10 10 10 10 10 50 Total uses 4,321 4,468 5,437 5,695 6,291 26,212 Net financing requirement 338 626 1,246 1,723 1,886 5,819 1982 Statistics ($ millions) Revenue 33,331 Net income 894 Capital expenditures 3,195
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5 Some Comments
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This note was uploaded on 10/14/2011 for the course WCOB 2043 taught by Professor Staff during the Fall '08 term at Arkansas.

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Financial planning and forecasting (brief version) -...

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