{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Session 4-Forecasting & cash budgets

Session 4-Forecasting & cash budgets - Ch 4...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
Ch. 4: Financial Forecasting, Planning and Budgeting—Part 1 BM 301 Introduction to Finance BM 301 Introduction to Finance
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Comment on Devotionals Great opportunity while you’re at BYU! You’ll wish you had when you’re away from here. MBA from BYU!!
Background image of page 2
Headlines This Morning “Adobe to Buy Web-Tracking Firm Omniture” “Deal Worth $1.8 Billion Will Allow Advertisers to More Closely Scrutinize Users’ Online Footprints” WSJ 9/16/2009, B1 Congratulations to former Marriott School Business Management student Josh James and colleagues! How did Adobe decide $1,800,000,000 was the appropriate price to pay for Omniture?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Mind Map Student’s question after last class: “ How does the current ratio really help me know if I have enough liquidity going forward ?” Answer: It doesn’t! Why? Financial statements are backwards- looking. As analysts/managers, we are really interested in what will happen in the future. Hence, we want to be able to make fundamental assumptions about the future progress of the firm and then forecast future results. Our goal is to understand the possible implications of today’s decisions on tomorrow’s performance .
Background image of page 4
Mind Map Learning objective: Create pro forma income statements and balance sheets using percent of sales forecasting (there are other methods) Identify the key variables in the forecasting process and the key limitations Understand the key interactions in the planning process Estimate a cash budget in good form
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Mind Map Remember: Forecasting is an art not a science We’re just discussing one commonly used approach to financial statement forecasting It has limitations but it can give us some feel for where the organization is going
Background image of page 6
Financial Forecasting Percent of Sales Method Step 1) Project sales revenues and expenses. (How would you do this?) Step 2) Estimate current assets and fixed assets necessary to support projected sales. (How would you do this?) Step 3) Analyze financing calculate “Discretionary Financing Needed” (DFN)
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
So, What’s the Point? Growth requires increased investment But how much additional financing is needed? The forecast allows us to project the “Discretionary Financing Needed” (DFN) Possible sources: banks, sale of stocks or bonds, etc. It might also warn us that our dividend policy is unreasonable (or not)
Background image of page 8
Alternatives to the Imprecise/Assumption- Dependent Process of Financial Forecasting Homer Simpson strategy – hide under some coats and hope everything turns-out alright Get a job as a greeter at Wal-Mart Talk your parents into funding your college student status in perpetuity!
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Are We Making a Detailed Road Map of the Firm’s Future?
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}