财务管理基础课件：Financial Forecasting
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• Number of units produced will depend on:
– Beginning inventory – Sales projections – Desired ending inventory
• To determine the production requirements:
Table 4-13
4-26
Actual Budget (Monthly Cash Flow)
• Difference between monthly receipts and payments is the net cash flow for the month
– Allows the firm to anticipate the need for funding at the end of each month
excess to repay the loan Table 4-15
4-28
Pro Forma Balance Sheet
• Represents the cumulative changes over time
– Important to examine the prior period’s balance sheet
– Establishing a sales projection – Determining production schedule and the associated use
of new material, direct labor, and overhead to arrive at gross profit – Computing other expenses – Determining profit by completing actual pro forma statement
• These statements are often required by bankers and other lenders as a guide for the future.
• A systems approach to develop pro forma statements consists of:
inventory • Then to goods manufactured during the period
4-13
Allocation of Manufacturing Cost and Determination of Gross Profits
Table 4-6
4-14
Value of Ending Inventory
Table 4-7
4-15
Other Expense Items
• Must be subtracted from gross profits to arrive at net profit
– Earning before taxes
• General and administrative expenses, and interest expenses are subtracted from gross profit
Table 4-2
4-9
Production Requirements for Six Months
Table 4-3
4-10
Unit Costs
• Cost to produce each unit:
Table 4-4
4-11
Total Production Costs
Table 4-5
4-12
Table 4-14
4-27
Cash Budget with Borrowing and Repayment Provisions
• Assumptions:
– The firm wishes to maintain minimum cash balance – If the balance goes below the minimum, the firm will borrow – If the balance goes above the minimum, the firm will use the
4-4
Development of Pro Form Forma Income Statement
• Provides a projection on the anticipation of profits over a subsequent period
• Four important steps include:
– Payment for material, once a month after purchases have been made
4-24
Average Monthly Manufacturing Costs
Table 4-12
4-25
Summary of All Monthly Cash Payments
patterns of cash inflows and outflows
4-18
Monthly Sales Pattern
Table 4-9
4-19
Cash Receipts
• In the case of Goldman Corporation:
– The pro forma income statement is taken for the first half year:
4-16
Actual Pro Forma Income Statement
Table 4-8
4-17
Cash Budget
• Pro forma income statement must be translated into cash flows
– The long-term pro forma is divided into smaller – More precise time frames set to help anticipate
• Sales are divided into monthly projections
– A careful analysis of past sales and collection records show:
• 20% of sales is collected in the month • 80% in the following month
• Outcome of a firm through external events might be a function of both:
– Risk-taking desires – Ability to hedge against risk with planning
• No growth or a decline - not the primary cause of shortage of funds
• A comprehensive financing plan must be developed for a significant growth
4-3
Constructing Pro Forma Statements
• Pro forma, or projected, financial statements enable a firm to estimate its future level of receivables, inventory, payables, as well as its anticipated profits and borrowing requirements.
Cost of Goods Sold
• Costs associated with units sold during the time period
– Assumptions for the illustration:
• FIFO accounting is used • First allocates the cost of current sales to beginning
4-23
Cash Payments (cont’d)
• Assumptions for the next two tables:
– Costs are incurred on an equal monthly basis over a six-month period
– Maintain production level to ensure maximum efficiency though sales volume varies from month to month
– Aftertax income
• Taxes are deducted from the earning before taxes
– Contribution to retained earnings
• Dividends are deducted from the aftertax income
• Material • Labor • Overhead
– Disbursements for general and administrative expenses
– Interest payments, taxes, and dividends – Cash payments for new plant and equipment
– Constructing income statement based on sales projections and the production plan
– Translating it into a cash budget – Assimilating all materials into a pro forma balance sheet
Financial Forecasting
Chapter Outline
• Financial forecasting in a firm’s strategic growth
• Three financial statements • Percent-of-sales method • Methods to determine the amount of new
– Some accounts will remain unchanged, while others will take new values
Units + Projected sales + Desired ending inventory – Beginning inventory = Production requirements
4-8
Stock of Beginning Inventory
Goldman Corporation has in stock the items shown in the Table below:
4-20
Monthly Cash Receipts
Table 4-10
4-21
Component Costs of Manufactured Goods
Table 4-11
4-22
Cash Payments
• Monthly costs associated with:
– Inventory manufactured during the period
funds required in advance • Factors that affect cash flow
4-2
Financial Forecasting
• Ability to plan ahead and make necessary adjustments before actual events occur
4-6
Establish a Sales Projection
• Let us assume Goldman Corporation has two primary products: wheels and casters
Table 4-1
4-7
Determine a Production Schedule and the Gross Profit
– Beginning inventory – Sales projections – Desired ending inventory
• To determine the production requirements:
Table 4-13
4-26
Actual Budget (Monthly Cash Flow)
• Difference between monthly receipts and payments is the net cash flow for the month
– Allows the firm to anticipate the need for funding at the end of each month
excess to repay the loan Table 4-15
4-28
Pro Forma Balance Sheet
• Represents the cumulative changes over time
– Important to examine the prior period’s balance sheet
– Establishing a sales projection – Determining production schedule and the associated use
of new material, direct labor, and overhead to arrive at gross profit – Computing other expenses – Determining profit by completing actual pro forma statement
• These statements are often required by bankers and other lenders as a guide for the future.
• A systems approach to develop pro forma statements consists of:
inventory • Then to goods manufactured during the period
4-13
Allocation of Manufacturing Cost and Determination of Gross Profits
Table 4-6
4-14
Value of Ending Inventory
Table 4-7
4-15
Other Expense Items
• Must be subtracted from gross profits to arrive at net profit
– Earning before taxes
• General and administrative expenses, and interest expenses are subtracted from gross profit
Table 4-2
4-9
Production Requirements for Six Months
Table 4-3
4-10
Unit Costs
• Cost to produce each unit:
Table 4-4
4-11
Total Production Costs
Table 4-5
4-12
Table 4-14
4-27
Cash Budget with Borrowing and Repayment Provisions
• Assumptions:
– The firm wishes to maintain minimum cash balance – If the balance goes below the minimum, the firm will borrow – If the balance goes above the minimum, the firm will use the
4-4
Development of Pro Form Forma Income Statement
• Provides a projection on the anticipation of profits over a subsequent period
• Four important steps include:
– Payment for material, once a month after purchases have been made
4-24
Average Monthly Manufacturing Costs
Table 4-12
4-25
Summary of All Monthly Cash Payments
patterns of cash inflows and outflows
4-18
Monthly Sales Pattern
Table 4-9
4-19
Cash Receipts
• In the case of Goldman Corporation:
– The pro forma income statement is taken for the first half year:
4-16
Actual Pro Forma Income Statement
Table 4-8
4-17
Cash Budget
• Pro forma income statement must be translated into cash flows
– The long-term pro forma is divided into smaller – More precise time frames set to help anticipate
• Sales are divided into monthly projections
– A careful analysis of past sales and collection records show:
• 20% of sales is collected in the month • 80% in the following month
• Outcome of a firm through external events might be a function of both:
– Risk-taking desires – Ability to hedge against risk with planning
• No growth or a decline - not the primary cause of shortage of funds
• A comprehensive financing plan must be developed for a significant growth
4-3
Constructing Pro Forma Statements
• Pro forma, or projected, financial statements enable a firm to estimate its future level of receivables, inventory, payables, as well as its anticipated profits and borrowing requirements.
Cost of Goods Sold
• Costs associated with units sold during the time period
– Assumptions for the illustration:
• FIFO accounting is used • First allocates the cost of current sales to beginning
4-23
Cash Payments (cont’d)
• Assumptions for the next two tables:
– Costs are incurred on an equal monthly basis over a six-month period
– Maintain production level to ensure maximum efficiency though sales volume varies from month to month
– Aftertax income
• Taxes are deducted from the earning before taxes
– Contribution to retained earnings
• Dividends are deducted from the aftertax income
• Material • Labor • Overhead
– Disbursements for general and administrative expenses
– Interest payments, taxes, and dividends – Cash payments for new plant and equipment
– Constructing income statement based on sales projections and the production plan
– Translating it into a cash budget – Assimilating all materials into a pro forma balance sheet
Financial Forecasting
Chapter Outline
• Financial forecasting in a firm’s strategic growth
• Three financial statements • Percent-of-sales method • Methods to determine the amount of new
– Some accounts will remain unchanged, while others will take new values
Units + Projected sales + Desired ending inventory – Beginning inventory = Production requirements
4-8
Stock of Beginning Inventory
Goldman Corporation has in stock the items shown in the Table below:
4-20
Monthly Cash Receipts
Table 4-10
4-21
Component Costs of Manufactured Goods
Table 4-11
4-22
Cash Payments
• Monthly costs associated with:
– Inventory manufactured during the period
funds required in advance • Factors that affect cash flow
4-2
Financial Forecasting
• Ability to plan ahead and make necessary adjustments before actual events occur
4-6
Establish a Sales Projection
• Let us assume Goldman Corporation has two primary products: wheels and casters
Table 4-1
4-7
Determine a Production Schedule and the Gross Profit