311 ch4 - Financial Forecasting and Working Capital Policy...

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

View Full Document Right Arrow Icon
Financial Forecasting and Working Capital Policy Chapter 4
Background image of page 1

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

View Full DocumentRight Arrow Icon
Planning The Board and top management create a strategic plan Operational planning maps out how to accomplish the strategic plan Financial planning is an important part of operational planning
Background image of page 2
After-tax Cash Flow ATCF = Earnings after taxes + Depreciation expense + Deferred Taxes We make adjustments to the income statement to reflect non-cash expenses and differences between financial reporting and tax reporting Does not reflect changes in net working capital which may use up some of this cash or provide more cash
Background image of page 3

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

View Full DocumentRight Arrow Icon
Statement of Cash Flows Financiers are interested in cash flow Earnings includes non-cash revenues and expenses Depreciation Deferred taxes Increases/Decreases in Working Capital Capital Spending is not included on the Income Statement (not included in earnings) Changes in Capital Structure are not shown on Income Statement
Background image of page 4
Shows exactly where firms received and used cash Splits cash flows into three areas Operating Investing Financing Two methods: Direct and Indirect Indirect is most commonly used Statement of Cash Flows
Background image of page 5

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

View Full DocumentRight Arrow Icon
Indirect Method Operating includes items on the Income Statement but adjusts for non-cash revenues and expenses Depreciation and deferred taxes Changes in working capital Investing includes purchases and sales of long-term assets and marketable securities Financing includes purchase/sale of company securities Stock, bonds, notes Dividends paid/received Exercise of stock options granted by the company
Background image of page 6
4,450 Cash, ending 744 Net Change in Cash (1,835) Net Cash from Financing Activities (2,800) Dividends (2,000) Change in LT Debt 2,965 Change in Notes Payable Financing Activities (3,600) Net Cash from Investing Activities (3,600) Capital Spending Investing Activities 6,179 Net Cash from Operating Activities 1,793 Change in Accounts Payable and Other CL (1,060) Change in Inventory (1,470) Change in Accounts Receivable 1,900 Depreciation 5,016 Net Income Operating Activities $3,706 Cash, beginning Statement of Cash Flows Drake Manufacturing Year ending December 31, 20X6
Background image of page 7

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

View Full DocumentRight Arrow Icon
Important questions to consider when examining the Statement of Cash Flows Are operations providing cash to the company or does the company need to borrow money to keep going? How are new investments paid for? Out of operations or by selling new securities?
Background image of page 8
Financial Forecasting Financial forecasting allows the firm to estimate the amount of additional financing which it will require in the next period Pro forma financial statements are an important element of the financial forecasting process Statements created to incorporate an assumed event rather than an actual event Created for a future time period Used for scenario analysis Short-term proformas tend to be more detailed than long-term proformas
Background image of page 9

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

View Full DocumentRight Arrow Icon
Pro Forma Financial Statements Projection of future financial statements
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.

This note was uploaded on 04/08/2008 for the course FINANCE 311 taught by Professor Bradley during the Spring '08 term at Clemson.

Page1 / 38

311 ch4 - Financial Forecasting and Working Capital Policy...

This preview shows document pages 1 - 11. Sign up to view the full document.

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