FIN 300 Lecture Notes - Lecture 3: Cash Flow Statement, Financial Plan, Capital Budgeting
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. Aggregation: the process by which smaller investment proposals of each of a firm"s operational units. Assumptions and scenarios: make realistic assumptions about important variables, run several scenarios where you vary the assumptions by reasonable amounts, determine at least a worst cast, normal case and best case scenario. Inputs: current financial statements, forecast of key variables (e. g. sales growth, interest rates, etc. , percentage of sales method + modifications. Outputs: pro-forma financial statements, projected cash flow statement, key financial ratios, asset and financial requirements. Sales forecast: growth in unit sales, changes in price per unit. Financial planning method in which accounts are projected depending on a firm"s predicted sales. Very simple, easy to use model that can be used as the first step in the forecasting process.
