Financial planning
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Financial Planning. Financial Planning Models Begin With Sales, but Where do Sales Come From?. Economy. Industry. Product. Sales. Changes in Sales Necessitate Changes in Assets and in Liabilities and Owners’ Equity. Sales. Assets. Liabilities. Owners’ Equity.

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Financial Planning

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Financial planning

Financial Planning


Financial planning models begin with sales but where do sales come from

Financial Planning Models Begin With Sales, butWhere do Sales Come From?

Economy

Industry

Product

Sales


Changes in sales necessitate changes in assets and in liabilities and owners equity

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 9 Pro Forma Income Statement


Problem 9 pro forma income statement1

Problem 9 Pro Forma Income Statement


Problem 10 pro forma balance sheet

Problem 10 Pro Forma Balance Sheet


Problem 11 pro forma balance sheet

Problem 11 Pro Forma Balance Sheet


External funds needed simplified

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

External Funds Needed (Simplified)With Numbers

  • CA*g = $11,350*.15 = $1,702.50

  • FA*g = $20,000*.15= $3,000.00

  • SL*g = $ 5,000*.15 = $ 750.00

  • S*(1+g)**(1-d)= $16,000*(1.15)*.289*.675= $3,589.38

    • EFN = 1,702 + 3,000 - 750 - 3589 = 363  365


External funds and growth

External Funds and Growth

Suppose EFN = 0, what is the growth rate?

Implies that

= .0995/[1-.1595-.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?


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