PSY 3400 Lecture Notes - Lecture 6: Cash Flow
19 Sep 2016
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Financing forecasting and Budgeting:
It is important that a firm has a working estimate of its financial needs over time so that it can
plan its acquisition of capital
To obtain funds at the lowest interest cost and on the best possible terms it is iportant to plan
for needs farin advance to allow sufficient time for negotiations.
Purpose:
1- set goals and implement them
2- anticipate financing needs
3- managing cash
4- maintain control over financial affairs and of the firm and signal conditions
5- makes favorable impression on lenders (shows good planning)
Forecasting Methodology:
• Basic relations – identify cause and effect
o Sales is a causal variable or base variable
• Basic Methods
o Percentage forecasting (naive forecasting) outside
o Internal forecasting inside
Asset balances, sales, cash flow and financing are interrelated
• Sale occur from assets; increased sales = increased assets = increased financing
• Illustration of the asset/sales and cash flow/financing relationship
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
It is important that a firm has a working estimate of its financial needs over time so that it can plan its acquisition of capital. To obtain funds at the lowest interest cost and on the best possible terms it is iportant to plan for needs farin advance to allow sufficient time for negotiations. 4- maintain control over financial affairs and of the firm and signal conditions. 5- makes favorable impression on lenders (shows good planning) Forecasting methodology: basic relations identify cause and effect, sales is a causal variable or base variable, basic methods, percentage forecasting (naive forecasting) outside. Asset balances, sales, cash flow and financing are interrelated: sale occur from assets; increased sales = increased assets = increased financing. Illustration of the asset/sales and cash flow/financing relationship: typically sales increase over time which generates a need for permanent assets not capital assets) and permanent new capital.
