Day 6-Ch 4-Part 2-9.19.11

Day 6-Ch 4-Part 2-9.19.11 - BusinessManagement201 Day6

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Business Management 201 Day  6 Chapter 4: Part 2—Financial Forecasting September 19, 2011
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Day 6 Agenda 1) Book Assignments—Updated Tuesday 2) Bring Financial Calculators Wednesday 3) TA Open Lab Session—Tuesday 10:00 AM-  11:00 AM—1102 JKB 4) TA POW Review Session—Tuesday 7:00 PM- 8:00 PM—3108 JKB 5) Reading Quiz Chapter 5—Due Wednesday  8:00 AM 6) Chapter 4: Part 2 Discussion
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Chapter 4:  Chapter 4:  Financial Forecasting, Financial Forecasting, Planning and Budgeting Planning and Budgeting
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Financial Forecasting OBJECTIVE:  To make  fundamental “heroic”  assumptions  about the future progress of the firm  and then  forecast future results .   ULTIMATE GOAL:   To understand the possible implications of today’s   decisions on tomorrow’s  performance.  
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Percent of Sales Forecasting Process 1) Project sales revenues and expenses. 2) Estimate current assets and fixed assets necessary to  support projected sales. 3) Analyze financing and calculate DFN (aka EFN or the  “plug” figure). Key Point:  Growth requires  increased investment… But efficient growth requires  advanced planning.
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Balance Sheet Assets Current Assets      Cash      Marketable Securities      Accounts Receivable      Prepaid Expenses      Inventories Fixed Assets      Land      Less:  Depreciation Current Liabilities      Accounts Payable      Notes Payable      Accrued Salaries Long-Term Liabilities      Mortgage Debt      Debentures Owners’ Equity      Common Stock  ($1 Par)      Add’l Paid In Capital      Retained Earnings Investment Decision Financing Decision
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Spontaneous Accounts What about Fixed assets? Sometimes… Excess Capacity? You must read the problem statement carefully! Most Current Assets  (usual assumption) Accounts Payable Accruals  (accrued wages, etc.)
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Non-Spontaneous Accounts Notes Payable Long-Term Liability Accounts Common Stock Interest  (base on previous year end  debt) Retained Earnings  (requires  calculation) Financing  Accounts  (BSD)
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: RE:  Old RE + Change in RE RE:  End RE = Beg RE + NI – Dividends RE:  Old RE + [Projected Sales x Net Margin x (1-Payout Ratio)] Payout Ratio:  Dividend/NI Plowback (Retention) Ratio:  1-Payout Ratio “Special Case” Line Items Key Point to Remember: Retained Earnings must be independently  forecasted! Interest:
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This note was uploaded on 01/06/2012 for the course BUS M 201-1 taught by Professor Jennlarson during the Fall '11 term at BYU.

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Day 6-Ch 4-Part 2-9.19.11 - BusinessManagement201 Day6

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