Professional Documents
Culture Documents
5: Financial Forecasting,
Planning and Budgeting
Financial Forecasting
1)
Financial Forecasting
1)
Financial Forecasting
1)
$32 million.
Next year, we forecast sales of
$40 million.
Net income should be 5% of sales.
Dividends should be 50% of
earnings.
This year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$8m
$16m
$24m
$4m
$4m
$1m
$6m
% of $32m
25%
50%
12.5%
12.5%
n/a
n/a
$15m
$7m
$2m
n/a
$9m
$24m
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
$6m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
$6m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
$17m
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
$6m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
$17m
$7m
n/a
projected
sales
net income
x
sales
(1
cash dividends
- net income )
projected
sales
net income
x
sales
$40 million x
.05
(1
x
cash dividends
- net income )
(1 - .50)
projected
sales
net income
x
sales
$40 million x
.05
(1
x
cash dividends
- net income )
(1 - .50)
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
$6m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
$17m
$7m
$3m
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
$6m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
$17m
$7m
$3m
n/a
$10m
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
$6m
% of $40m
25%
50%
12.5%
12.5%
n/a
n/a
$17m
$7m
$3m
n/a
$10m
$27m
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
$6m
% of $40m
25%
50%
12.5%
How
much
12.5%
Discretionary
n/a
Financing
n/a
$17m
$7m
$3m
$10m
$27m
will we
Need?
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
$6m
% of $40m
25%
50%
12.5%
How
much
12.5%
Discretionary
n/a
Financing
n/a
$17m
$7m
$3m
$10m
$27m
will we
Need?
n/a
Next year
Assets
Current Assets
Fixed Assets
Total Assets
Liab. and Equity
Accounts Payable
Accrued Expenses
Notes Payable
Long Term Debt
Total Liabilities
Common Stock
Retained Earnings
Equity
Total Liab. & Equity
$10m
$20m
$30m
$5m
$5m
$1m
$6m
% of $40m
25%
50%
12.5%
How
much
12.5%
Discretionary
n/a
Financing
n/a
$17m
$7m
$3m
$10m
$27m
will we
Need?
n/a
Predicting Discretionary
Financing Needs
Predicting Discretionary
Financing Needs
Discretionary Financing Needed =
Predicting Discretionary
Financing Needs
Discretionary Financing Needed =
projected
total
assets
projected
total
liabilities
projected
owners
equity
Predicting Discretionary
Financing Needs
Discretionary Financing Needed =
projected
total
assets
projected
total
liabilities
projected
owners
equity
$30 million -
Predicting Discretionary
Financing Needs
Discretionary Financing Needed =
projected
total
assets
projected
total
liabilities
projected
owners
equity
$30 million -
where
where
where
where
common equity
x
assets
Budgets
Budget:
Budgets
Budgets indicate the amount and