Financial Planning. Financial Planning Models Begin With Sales, but Where do Sales Come From? EconomyIndustryProduct Sales.

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Presentation transcript:

Financial Planning

Financial Planning Models Begin With Sales, but Where do Sales Come From? EconomyIndustryProduct Sales

Changes in Sales Necessitate Changes in Assets and in Liabilities and Owners’ Equity Sales Assets Liabilities Owners’ Equity

Problem 9 Pro Forma Income Statement

Problem 10 Pro Forma Balance Sheet

Problem 11 Pro Forma Balance Sheet

External Funds Needed (Simplified) Where, CA = Current Assets FA = Fixed Assets SL = Spontaneous Liabilities S = Original Sales g = growth rate in sales  = net profit margin d = dividend payout ratio

External Funds Needed (Simplified) With Numbers CA*g = $11,350*.15 = $1, FA*g = $20,000*.15= $3, SL*g = $ 5,000*.15 = $ S*(1+g)*  *(1-d)= $16,000*(1.15)*.289*.675= $3, –EFN = 1, , = 363  365

External Funds and Growth Suppose EFN = 0, what is the growth rate? Implies that =.0995/[ ] =.1343 = 13.43% Suppose no external funding of any kind is used. What is the growth rate? Suppose no external equity is used, but enough debt is used to maintain the same total debt-to-total asset ratio. What growth can be sustained?