FIN 300 Lecture Notes - Lecture 3: Retained Earnings, Accounts Payable, Dividend Payout Ratio
8 Feb 2015
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Chapter 4: what is financial planning, components of the plan, percentage of sales approach, external financing and growth. 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 (e. g. sales growth, interest rates etc. : model. Percentage of sales method + modifications: outputs. What drives the planning process: sales forecast. Changes in price per unit: how to estimate sales growth. Historical growth rates (e. g. average growth rate) Economic analysis (e. g. relate to gdp growth, interest rates, employment rates etc. )
