FIN 300 Lecture Notes - Lecture 3: Capital Intensity, Asset Turnover, Profit Margin

• School: Ryerson University
• Department: Finance
• Course: FIN 300
• Professor: Laleh Samarbakhsh

Document Summary

Investment in new assets capital budgeting decisions: degree of financial leverage capital structure decisions, liquidity requirements net working capital decisions, cash paid to shareholders dividend policy decisions. 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. Forecast of key variables (ex: sales growth, interest rates, etc. : model. Percentage of sales method + modifications: output. What drives the planning process: sales forecast. Changes in price per unit: how to estimate sales growth. Historical growth rates (ex: average growth rate) Economic analysis (ex: relate to gdp growth, interest rates, employment rates, etc. ) Industry analysis (ex: firm and competitor analysis, new product development, advertising and credit policy, production capacity)