1 Financiering Jeroen E. Ligterink [email protected] .
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Transcript of 1 Financiering Jeroen E. Ligterink [email protected] .
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BMM 18: Financial Planning
Topics Covered
• What is Financial Planning?
• Financial Planning Models
• Example: Executive Cheese
• Planners Beware
• External Financing and Growth
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Financial Planning
The Financial Planning Process Analyzing the investment and financing choices open to the firm.
Projecting the future consequences of current decisions.
Deciding which alternatives to undertake.
Measuring subsequent performance against the goals set forth in the financial plan.
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Financial Planning Models
Inputs Planning Model Outputs
Inputs - Current financial statements. Forecasts of key variables (such as sales or interest rates).
Planning Model - Equations specifying key relationships.
Outputs - Projected financial statements (pro forma). Financial ratios. Sources and uses of funds.
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Financial Planning Models
Pro Formas - Projected or forecasted financial statements.
Percentage of Sales Model - Planning model in which sales forecasts are the driving variable and most other variables are proportional to sales.
Balancing Item - Variable that adjusts to maintain the consistency of a financial plan. Also called plug.
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Executive Cheese
Current Income Statement and Balance Sheet
Sales $1,200
Costs 1,000
Net Income 200
Assets $2,000 Debt $ 800
Equity 1,200
Total $2,000 Total $2,000
Income Statement
Balance Sheet (YTD)
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Executive Cheese
Pro forma Income Statement and Balance Sheet
Sales $1,320
Costs 1,100
Net Income 220
Assets $2,200 Debt $ 800
Equity 1,320
Total $2,200 Total $2,200
Income Statement
Balance Sheet
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Executive Cheese
• Pro forma Balance Sheet with dividends fixed at $180 and debt used as the balance item.
Balance Sheet
Assets $2,200 Debt $ 960
Equity 1,240
Total $2,200 Total $2,200
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Executive FruitIncome Statement
Revenue 2,000$
COGS 1,800 90% of sales
EBIT 200 Difference = 10% of sales
Interest 40 10% of debt at start of year
Earnings before taxes 160 EBIT-interest
State and federal tax 64 40% of (EBIT-interest)
Net income 96 EBIT-interest-taxes
Dividends 64 Payout ratio=2/3
Retained earnings 32 Net income - dividends
Balance Sheet
Assets
Net working capital 200 10% of sales
Fixed assets 800 40% of sales
Total assets 1,000 50% of sales
Liabilities and shareholders' equity
Long term debt 400
Shareholders' equity 600
Total Liab + Equity 1,000 Equals total assets
1999 Financial Statements
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Executive Fruit2000 Pro Forma Statements
Income StatementRevenue 2,200$ 10% higherCOGS 1,980 10% higherEBIT 220 10% higherInterest 40 unchangedEarnings before taxes 180 EBIT-interestState and federal tax 72 40% of (EBIT-interest)Net income 108 EBIT-interest-taxesDividends 72 Payout ratio=2/3Retained earnings 36 Net income - dividends
Balance SheetAssets
Net working capital 220 10% higherFixed assets 880 10% higherTotal assets 1,100 10% higher
Liabilities and shareholders' equityLong term debt 400 Temp held fixedShareholders' equity 636 Increased by RETotal Liab + Equity 1,036 Sum of debt plus equity Required external financing 64
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Planners Beware
• Percent of sales methods are not realistic because fixed costs exist.
• Most models generate accounting numbers not financial cash flows
• Adjustments must be made to consider these and other factors.
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External Financing & Growth
$64,000
36,000-200,000)(.50=
earnings retained-cales in Increaseassets) (sales/net=financing external Required
Internal growth rate =retained earnings
assets
=retained earnings
net incomex
net income
equityx
equity
assets
Sustainable growth rate = plowback ratio x retrun on equity
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BMM 19: Working capital management and short term planning• Working Capital
• Links Between Long-Term and Short-Term Financing
• Tracing Changes in Cash and Working Capital
• Cash Budgeting
• A Short-Term Financing Plan
• Sources of Short-Term Financing
• The Cost of Bank Loans
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Cash Conversion Cycle
Period between firm’s payment for materials and collection on its sales.
Cash
Finished goodsinventory
ReceivablesRaw materials
inventory
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Cash conversion cycle
Inventory period =average inventory
annual COGS / 365
Receivables period =average accounts receivable
annual sales / 365
Payable period =average accounts payable
annual COGS / 365
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Example - Cash Conversion Cycle
Given the aggregate balance sheet and income statement for US Manufacturing firms, calculate the cash conversion cycle.
303304A/P
481471A/R3,518COGS
468470Inventory3,968Sales
'99qtr 1st of End'98qtr 1st End
SheetBalanceStatementIncome
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Example - Cash Conversion Cycle Inventory period
days 8.48
3,518/365
468)/2+(470=
COGS/365 annual
inventory average=periodInventory
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Example - Cash Conversion CycleReceivables period
days 35.6=
3,968/365
481)/2+(471=
sales/365 annual
receivable accounts average=period sReceivable
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Example - Cash Conversion Cycle: Payable period
days 31.5=
365/518,3
303)/2+(304=
COGS/365 annual
payable accounts average=period Payable
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Cash Budgeting
Steps to preparing a cash budget
Step 1 - Forecast the sources of cash.
Step 2 - Forecast uses of cash.
Step 3 - Calculate whether the firm is facing a cash shortage or surplus.
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Sources of Short Term Financing
• Bank loans
• Commercial paper
• Secured loans
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Cost of Bank Loans
Simple Interest
Effective annual rate
Amount of loan X annual interest rate
number of periods in the year
)(1 + quoted annual interest raten
n- 1
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Cost of Bank Loans
Discount Interest
)(Face value of loan X 1 - quoted annual interest ratenumber of periods in the year
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Minicase chapter 19
• Autodealer Capstan heeft in 2005 regeling uitgestelde betaling (koop nu betaal over een half jaar) ingevoerd. Het is nu einde eerste kwartaal 2006
• Wat zijn de consequenties van de kortingsaktie? Investering in netto werkkapitaal
• Hoe is het gefinancierd? Bancaire financiering
• Bank wil niet verder financieren, is dit juist bezien vanuit haar perspectief?