Chapter16 - Chapter 16 Financial Planning and Forecasting...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 16 Financial Planning and Forecasting Learning Objectives After reading this chapter, students should be able to: Briefly explain the following terms: mission statement, corporate scope, corporate objectives, corporate strategies, operating plans, and financial plans. Discuss the importance of sales forecasts in the financial planning process. Calculate additional funds needed (AFN), using both the equation and projected financial statement methods. Identify the key determinants of external funds requirements, and make excess capacity adjustments to both the AFN equation and projected financial statement methods. Use regression to improve financial forecasts, and explain when this provides a better forecast. Use ratios to modify accounts receivable or inventories in the forecasting process, and explain when one might use this technique. Chapter 16: Financial Planning and Forecasting Learning Objectives 175 Lecture Suggestions In Chapter 4, we looked at where the firm has been and where it is nowits current strengths and weaknesses. Now, in Chapter 16, we look at where it is projected to go in the future. What we cover, and the way we cover it, can be seen by scanning the slides and Integrated Case solution for Chapter 16, which appears at the end of this chapter solution. For other suggestions about the lecture, please see the Lecture Suggestions in Chapter 2, where we describe how we conduct our classes. DAYS ON CHAPTER: 3 OF 58 DAYS (50-minute periods) 176 Lecture Suggestions Chapter 16: Financial Planning and Forecasting Answers to End-of-Chapter Questions 16-1 The need for external financing depends on 5 key factors: 1. Sales growth ( S). Rapidly growing companies require large increases in assets, other things held constant. 2. Capital intensity (A*/S ). The amount of assets required per dollar of sales, the capital intensity ratio, has a major effect on capital requirements. Companies with high assets-to-sales ratios require more assets for a given increase in sales, hence have a greater need for external financing. 3. Spontaneous liabilities-to-sales ratio (L*/S ). Companies that spontaneously generate a large amount of funds from accounts payable and accruals have a reduced need for external financing. 4. Profit margin (M). The higher the profit margin, the larger the net income available to support increases in assets, hence the lower the need for external financing....
View Full Document

Page1 / 26

Chapter16 - Chapter 16 Financial Planning and Forecasting...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online