财务策划步骤和方法.pptx

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1、1Financial Planning and Forecasting2Financial PlansnFinancial plans evaluate the economics behind the strategy and operations.They consist of six steps:1.Projected financial statements:to analyze the effects of the operating plan on projected profits and financial ratios.2.Determine the funds needed

2、 to support the plan.3.Forecast funds availability.4.Establish and maintain a system of controls to govern the allocation and use of funds within the firm.5.Develop procedures for adjusting the basic plan if the economic forecasts upon which the plan was based do not materialize6.Establish a perform

3、ance-based management compensation system.3Sales ForecastnSales forecasts are usually based on the analysis of historic data.nAn accurate sale forecast is critical to the firms profitability:Under-optimistic Too much inventoryand/or fixed assetsLow turnover ratioHigh cost of depreciation and storage

4、Write-offs of obsolete inventoryLow profitLow rate of return on equityLow free cash flowDepressed stock priceOver-optimistic Company will fail to meet demandMarket share will be lostSales Forecast4The Percent of Sales MethodnThis is the most common method,which begins with the sales forecast express

5、ed as an annual growth rate in dollar sale revenue.nMany items on the balance sheet and income statement are assumed to change proportionally with sales.5The Percent of Sales Method:An Example*Denotes spontaneous,which means increase spontaneously with sales.All assets are spontaneous.On the liabili

6、ty and equity side,Accounts Payable and Accruals are the only spontaneous funds.During the next year,sales increase by 15%resulting in a 15%increase in Total Assets(4,374).Hence,the asset side on next years balance sheet must go up by 15%.Also,the spontaneous funds on the liability side must also in

7、crease by 15%.6Example(contd):The spontaneous items on the liabilities side of the projected balance sheet must also increase by 15%.7Example(contd):8Example(contd):nRetained earnings will also increase but not at the same rate as sales.The 2002 amount of RE is the old amount plus the addition to re

8、tained earnings,which we calculated in the projected income statement.nSince the TA=TL and the TA have increased to 33,534,while TL have increased to 31,406,there are additional funds needed(AFN)of 2,128 on the liabilities side.9Example(contd):nThere are two categories of sources for the AFN:nIssuan

9、ce of new stocks(equity)nUse some combination of debtnIn this example,there are internally generated funds from:nRetained EarningsnAccounts Payable and Accruals10Example(contd):11Financing FeedbacksnIf the business issues new debt and common stock,the total amount of interest and dividends paid will

10、 change.nBecause interest and dividends must be paid with cash,any increase in these costs will decrease the funds the firm has to investthat is,the amount of income added to retained earnings will be less than originally forecasted.nWhen we consider the effects of the increased interest and dividen

11、d payments,we find that the AFN is actually greater than originally expected.nFinancing feedbacksthat is,the effects on the financial statements of actions taken to finance forecasted increases in assetsmust be considered to determine the exact amount of AFN.12Example(contd):nBorrow at 10%(Notes Pay

12、able).nIt means that next year the interest will be 560+(10%*2,128)nInstead of retaining 1,166,the company retains 1,096 because of the interest.nThe end results is that the company has to raise 2,128+70=219813The AFN FormulanIn the formula,we can use either year(2001 or 2002)numbers to arrive at th

13、e final result.n*A refers to the Total Assets.n*L refers to the sum of all spontaneous liabilities(Accounts Payable and Accruals).70 AFN14Steps in Financial ForecastingnForecast salesnProject the assets needed to support salesnProject internally generated fundsnProject outside funds needednDecide ho

14、w to raise fundsnSee effects of plan on ratios and stock price15Forecasting salesnReview past sales(five to ten years).nYou can use average growth rate but it may not give you a correct estimate.nUse regression slope to compute growth rate.nConsider changes in economy,market conditions,etc.nImproper

15、 sales forecast can lead to serious financial planning issues.16After sales forecasting,what is next?nForecast the COGS(a certain%of sales).nInventory numbers will change with sales.nA/R(consider credit policy changes)will change and so will A/R.nAccordingly,cash and cash equivalents will change.17S

16、ales forecasting and longer term assets and liabilitiesnDo they need to be changed as well along with sales?nDepends.nExisting production capacity relative to the new sales projections.18Ready to prepare the income statementnStart with forecasted salesnProject the COGSnAssuming changes in longer ter

17、m assets and liabilities,forecast depreciation and interest expenses(assumptions required for interest rates/COC,etc.)nCompute EBIT.19Ready to prepare the Balance SheetnDetermine the new level of assets(both short-term and longer term).nSeparate them as operating assets and long term assets.nForecas

18、t liabilities(current as well as longer term).nIs any common stock or preferred stock to be issued?If so,take into account the changes in these numbers.20Additional funds needednForecasted assets and liabilities may not perfectly match.nThe difference is because of AFN or additional funds needed.nAF

19、N is the required assets minus the specified sources of financing.21How would increases in these items affect the AFN?nHigher sales:nIncreases asset requirements,increases AFN.nHigher dividend payout ratio:nReduces funds available internally,increases AFN.(More)22How would increases in these items a

20、ffect the AFN?nHigher profit margin:nIncreases funds available internally,decreases AFN.nHigher capital intensity ratio,A*/S0:nIncreases asset requirements,increases AFN.nPay suppliers sooner:nDecreases spontaneous liabilities,increases AFN.23Projecting Pro Forma Statements with the Percent of Sales

21、 MethodnProject sales based on forecasted growth rate in salesnForecast some items as a percent of the forecasted salesnCostsnCashnAccounts receivable(More.)24nItems as percent of sales(Continued.)nInventoriesnNet fixed assetsnAccounts payable and accrualsnChoose other itemsnDebtnDividend policy(whi

22、ch determines retained earnings)nCommon stock25Sources of Financing Needed to Support Asset RequirementsnGiven the previous assumptions and choices,we can estimate:nRequired assets to support salesnSpecified sources of financingnAdditional funds needed(AFN)is:nRequired assets minus specified sources

23、 of financing 26Implications of AFNnIf AFN is positive,then you must secure additional financing.nIf AFN is negative,then you have more financing than is needed.nPay off debt.nBuy back stock.nBuy short-term investments.27How to Forecast Interest ExpensenInterest expense is actually based on the dail

24、y balance of debt during the year.nThere are three ways to approximate interest expense.Base it on:nDebt at end of yearnDebt at beginning of yearnAverage of beginning and ending debtMore28Basing Interest Expense on Debt at End of YearnWill over-estimate interest expense if debt is added throughout t

25、he year instead of all on January 1.nCauses circularity called financial feedback:more debt causes more interest,which reduces net income,which reduces retained earnings,which causes more debt,etc.More29Basing Interest Expense on Debt at Beginning of YearnWill under-estimate interest expense if debt

26、 is added throughout the year instead of all on December 31.nBut doesnt cause problem of circularity.More30Basing Interest Expense on Average of Beginning and Ending DebtnWill accurately estimate the interest payments if debt is added smoothly throughout the year.nBut has problem of circularity.More

27、31Equation AFN versus Pro Forma AFN nEquation method assumes a constant profit margin.nPro forma method is more flexible.More important,it allows different items to grow at different rates.32Summary:How different factors affect the AFN forecast.nExcess capacity:lowers AFN.nEconomies of scale:leads to less-than-proportional asset increases.nLumpy assets:leads to large periodic AFN requirements,recurring excess capacity.33Economic Value Added(EVA)EVA=(Operating Income)x(1-T)-WACC x(Capital Employed)Changes in nRatiosnPerformancenDebtnRisk will lead to changes in EVA.