MGMT310NotesChpt04 - WhatisFinancialPlanning?

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What is Financial Planning? Financial Planning Models: A First Look The Percentage of Sales Approach What is the goals of the firm? How will the firm meet these goals? Need for Investment in new assets capital budgeting decisions Degree of financial leverage capital structure decisions Cash paid to shareholders dividend policy decisions Liquidity requirements net working capital decisions Building a Financial Plan MGMT 310: Spring 2011 Dr. Amanda Thompson 1
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Determine planning horizon Usually long run, years 2 5 Aggregate capital projects at desired level Assumptions and Policy decisions Make realistic assumptions about important variables Implement policy decisions (e.g. days of inventory) Scenarios Run several scenarios where you vary the assumptions by reasonable amounts Determine at least a worst case, normal case, and best case scenario Steps to building a financial plan Why bother? Examine interactions between decisions Growth requires financing! Systematically explore options and future opportunities Avoid surprises by identifying possible outcomes and planning accordingly Ensure feasibility and consistency with internal goals Makes managers think! Financial Plans are never perfect MGMT 310: Spring 2011 Dr. Amanda Thompson 2
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Economic Assumptions : Educated estimates Sales Forecast : Often a stated growth rate Pro Forma Statements Percentage of sales
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This note was uploaded on 04/04/2012 for the course MGMT 310 taught by Professor Matthewjamesbarcaskey during the Spring '08 term at Purdue University-West Lafayette.

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MGMT310NotesChpt04 - WhatisFinancialPlanning?

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