chapter 7Long-Term Financial Planning and Growth(财务管理,Gregory A. Kuhlemeyer).ppt

Chapter 7 Long-Term Financial Planning and Growth Chapter Organization What is Financial Planning? Financial Planning Models: A First Look The Percentage of Sales Approach External Financing and Growth Some Caveats of Financial Planning Models What is Financial Planning? Formulates the way financial goals are to be achieved. Requires decisions to be made about the uncertain future. Recall that the goal of the firm is the maximise the market value of the owner’s equity - growth will result from this goal being achieved. Dimensions of Financial Planning The planning horizon is the long-range period that the process focuses on (usually 2 - 5 years). Aggregation is the process by which smaller investment proposals of each of a firm’s operational units are added up. Financial planning usually requires three alternative plans: worst case, normal case and best case. Accomplishments of Planning Interactions - linkages between investment proposals and financing choices. Options - firm can develop, analyse and compare different scenarios. Avoiding surprises - development of contingency plans. Feasibility and internal consistency - develops a structure for reconciling different objectives. Elements of a Financial Plan An externally supplied sales forecast (either an explicit sales figure or growth rate in sales). Projected financial statements (pro forma). Projected capital spending. Necessary financing arrangements. Amount of new financing required (‘plug’ figure). Example of a Simple Financial Planning Model Recent Financial Statements Income statement Balance sheet Sales $100 Assets $50 Debt $20 Costs 90 Equity 30 Net Income $ 10 Total $50 Total $50 Assume that: 1. sales are projected to rise by 25% 2. the debt/equity ratio stays at 2/3 3. costs and assets grow at the same rate as sales Example of a Simple Financial Planning Model Pro Forma Financial Statements Income statement Balance sheet Sales $ 125 Assets $ 6