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Problem Day Forecasting 1.30.2012 v3.1

Problem Day Forecasting 1.30.2012 v3.1 - Problem Day...

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Unformatted text preview: Problem Day: Financial Forecasting Housekeeping Items • New Quiz Time Deadlines o POWs 10pm o Reading quizzes 11am • Phillips Petroleum POW Quiz due Tuesday at 10pm • Ch. 5 Reading Quiz due Wed morning by 11am • Bring your calculator next week! • TA email: [email protected] o POW Helps • EPS = Net Income / Outstanding Common Shares o Use 1992 # of shares • Common Equity includes RE o (Hint: New RE = Old RE + New NI – Dividends) • Averages o Calculate the ratio for each year and then average the years Today’s Agenda • Prayer • Careers in Finance • Review of ROE • Cash Budgeting • Forecasting o Percent of Sales Method Careers in Finance Banking – Investment & Commercial • Debt / Equity issuance • Advisory services • M & A • Capital restructuring • Mega $ corporate transactions • NYC, San Francisco Corporate Finance • Financial accounting • Financial planning and analysis Consulting • PWC, Accenture • Combine strategy & finance • Gain variety of experience and skills Fund Management • Venture Capital • Private Equity • Mutual Funds • Hedge Funds • Private Wealth Management Tales From a Financial Analyst • Sales increasing • Net Income increasing • But… No Cash! How Do the Balance Sheet and Income Statement Tie Together? • Balance Sheet Assets = Liabilities + Owner’s Equity What happens if net income increases? • Owner’s Equity increases! If Owner’s Equity increases, what else must increase? • An Asset! • Typically accounts receivable • Income Statement: Sales- Expenses Net Income Terminology • Item 1 • Synonym Operating Income Net Receivables Net Income Total Debt PP&E COGS SG&A P&L EBIT or Operating Profit Accounts Receivable Net Profit or Net Loss Total Liabilities Property, Plant & Equip. Cost of Goods Sold Selling, General, & Admin. Profit & Loss ROE – Leverage Multiplier Revisit Assets $1mm Liabilities $500k Equity $500k = Assets $1mm = Liabilities $800k Equity $200k ROE = 50 / 500 = 10% Net Income = $50k ROE = 50 / 200 = 25% The same amount of net income is available to less equity holders. We changed nothing in the firm except how it’s financed! Cash Budget • Cobra Kai collects 60% of its sales during the month of the sale, 30% one month after the sale, and 10% two months after the sale. The company expects sales of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in November. How much money does Cobra Kai expect to collect in October?...
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Problem Day Forecasting 1.30.2012 v3.1 - Problem Day...

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