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# Financial Planning PowerPoint PPT Presentation

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

Economy

Industry

Product

Sales

Sales

Assets

Liabilities

Owners’ Equity

### 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 = \$1,702.50

• 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

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?