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Cash Flow and Financial Planning

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6 views

Cash Flow and Financial Planning

Jrrjdjdjddndjfckfmdmdrm

Uploaded by

farham.halim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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financial planning

FinMan 1
Darwin Lacbao
the financial planning process
financial planning process
Planning that begins with long-term (strategic)
long-term, or strategic, financial plans
short-term (operating)
financial plans that in turn Plans that lay out a company’s
financial plans
guide the formulation of planned financial actions and
Specify short-term financial ac-
short-term, or operating, the anticipated impact of those
tions and the anticipated im-
plans and budgets. actions over periods ranging
pact of those actions.
from 2 to 10 years.
the financial planning process

short-term (operating)
financial plans
Specify short-term financial ac-
tions and the anticipated im-
pact of those actions.
cash planning: cash budgets
cash budget (cash forecast) sales forecast
A statement of the firm’s The prediction of the firm’s
sales over a given period,
planned inflows and outflows based on external and/or
of cash that is used to estimate internal data; used as the key
its short-term cash input to the short-term financial
planning process.
requirements.
external forecast
A sales forecast based on the
relationships observed between
the firm’s sales and certain key
external economic indicators.
internal forecast
A sales forecast based on a
buildup, or consensus, of sales
forecasts through the firm’s
own sales channels.
preparing the cash budget
total cash receipts
All of a firm’s inflows of cash
during a given financial period.

total cash disbursements


All outlays of cash by the firm
during a given financial
Period.

depreciation and other noncash


charges are NOT included in the cash
budget
preparing the cash budget
net cash flow
The mathematical difference
between the firm’s cash
receipts and its cash
disbursements in each period.
ending cash
The sum of the firm’s beginning
cash and its net cash flow for
the period.
required total financing
Amount of funds needed by the
firm if the ending cash for the
period is less than the desired
minimum cash balance; typically
represented by notes payable.
excess cash balance
The (excess) amount available
for investment by the firm if the
period’s ending cash is greater
than the desired minimum cash
balance; assumed to be invested
in marketable securities.
evaluating the cash budget
The cash budget indicates
whether a cash shortage or
surplus is expected in each
of the months covered by the
forecast. Each month’s figure is
based on the inter-
nally imposed requirement of a
minimum cash balance and
represents the total
balance at the end of the
month.
profit planning: pro forma statements
Whereas cash planning focuses Two inputs are required for
on forecasting cash flows, profit preparing pro forma
planning relies on accrual statements: (1) financial
concepts to project the firm’s statements for the preceding
profit and overall financial year and (2) the sales forecast
position. for the coming year. A variety
of assumptions must also be
pro forma statements made.
Projected, or forecast, income
statements and balance sheets.
pro forma income statement
percent-of-sales method
A simple method for
developing the pro forma
income statement; it forecasts
sales and then expresses the
various income statement
items as percentages of
projected
sales.
preceding fs and sales forecast
preceding fs and sales forecast
COGS Percentage Operating Expense Interest Expense

percent-of-sales method
A simple method for
developing the pro forma
income statement; it forecasts
sales and then expresses the
various income statement
items as percentages of
projected
sales.
pro forma income statement
pro forma income statement
pro forma balance sheet
judgmental approach
A simplified approach for
preparing the pro forma
balance sheet under which the
firm estimates the values of
certain balance sheet accounts
and uses its external financing
as a balancing, or “plug,”
figure.

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