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9 Cards in this Set
- Front
- Back
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Role of Financial Planning |
Understand investment / finance interactions Point out Options Contingency Planning Feasibility/Internal consistency with goals |
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Financial Planning Model |
Sales Forecast Economic FC Pro Forma Statements Asset Requirements Financial Requirements "The Plug" (EFN) |
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How Much can sales grow without adding assets |
Current Sales/Capacity % used |
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EFN Assumptions |
Assets, Costs, Sales grow Debt, Equity Don't Same dividend payout ratio as last year |
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EFN Problem-Net Income and Equity, percent growth |
Net Income=Dividends + Retained Earnings Retained EArnings= Owner's Equity OR Retention Ratio= NI (old) - dividends/ Net income Then New Year net income x Ret. Ratio new sales-old/old |
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Internal Growth Rate |
Rate company can grow with internal financing only (ROA x b)/(1-(ROA x b)) B=1 -ROA or ROE |
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Sustainable Growth Rate |
Max rate company can grow keeping internal resources the same and debt/equity ratio the same SGR=ROE x b etc...... |
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Financial Truism |
financial plans don't work Financial planning does |
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B= |
RETENTION RATIO (1- dividend payout) |
