FIN 300 Lecture Notes - Lecture 3: Financial Plan, Dividend Policy, Financial Statement
Document Summary
Financial planning process: planning horizon - divide decisions into short-run decisions (usually next 12 months) and long-run decisions (usually 2 5 years, aggregation - combine capital budgeting decisions into one big project, assumptions and scenarios. Run several scenarios where you vary the assumptions by reasonable amounts. Determine at least a worst case, normal case and best case scenario. Sales forecast many cash flows depend directly on the level of sales (often estimated using a growth rate in sales) Pro forma statements setting up the financial plan in the form of projected financial statements allows for consistency and ease of interpretation. Asset requirements how much additional fixed assets will be required to meet sales projections. Financial requirements how much financing will we need to pay for the required assets. Plug variable management decision about what type of financing will be used (makes the. Economic assumptions explicit assumptions about the coming economic environment.
