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21 Cards in this Set
- Front
- Back
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Pro Forma Statements |
Projected, or forecasted financial statements; the income statement and the balance sheet |
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Financial Planning Process |
Planning that begins with long-term (strategic) financial plans that in turn guide the formulation of short-term (operating) plans and budgets |
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Long-term (strategic) financial plans |
Planned financial actions and the anticipated financial impact of those actions over periods ranging from 2 to 10 years |
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Short-term (operating) financial plans |
Planned short-term financial actions and the anticipated impact of those actions |
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Cash budget (cash forecast) |
A statement of the firms planned inflows and outflows of cash that is used to estimate its short-term cash requirements |
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Sales Forecast |
The prediction of the firm's sales over a given period, based on external and internal data and used as the key input to the financial planning process |
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External Forcast |
A sales forecast based on the relationships observed between the firms sales and certain key external economic indicators |
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Internal Forecast |
A sales forecast based on a buildup, or consensus, of forecasts through the firms own sales channels |
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Cash Receipts |
All of the firms inflows of cash in a given financial period |
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Cash disbursements |
All outlays of cash by the firm during a given financial period |
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Net Cash Flow |
The mathematical difference between the firms cash receipts and its cash disbursements in each period |
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Ending Cash |
The sum of the firms beginning cash and its net cash flow for the period |
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Required Total Financing |
Amount of funds needed by the firm if the ending cash for the period is less than the desired minimum cash balance;typically represented by a line of credit |
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Excess cash balance |
The (excess) amount available for investment by the firm if the periods ending cash is greater than the desired minimum cash balance assumed to be invested in marketable securities. |
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Percent-of-sales method |
A method of developing the pro forma income statement that assumes all expenses remain the same percent of sales in the forecast year as they were in the most recent fiscal year |
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Dividend payout ratio |
The period of NIAT(or earnings available to common shareholders) that is paid out to common shareholders as dividends during the year |
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Spontaneous Sources of Financing |
The increase in accounts payable and accounts that will occur as inventory and other direct costs of production increase with sales, an internal source of financing for the company |
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Total financing required |
The change in total assets from the latest fiscal year to the forecast year |
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Statement of external financing required |
The forecasted statement that shows the difference between total financing required and the two internal sources of financing, providing the amount of external financing required |
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Capital Intensity Ratio |
The dollar amount of assets needed for each $1 increase in sales; the larger the number, the more capital-intensive the company, and therefore the higher the amount of financing required |
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Judgmental approach |
A method for developing the pro forma balance sheet in which the values of certain balance sheet accounts are estimated, and others are calculated based on a ratio analysis |
