Financial Forecasting: Cash Flows and Capital
Classified in Economy
Written at on 
English with a size of 6.21 KB.
Step 1: Forecasted Operating Cash Flows
Step 1: Forecasted Operating Cash Flows | |||
t | t+1 | t+2 | |
1. Revenues | Sales t | Salest (1+Forecast) | Salest (1+Forecast)² |
2. Cost: (92% of revenues) | Cost of goods sold t + Other expenses t | Sales t+1 * 0.92 | Sales t+2 * 0.92 |
3. Depreciation (9% net fixed assets, Start year) | Depreciation t | Net fixed Assets t * 0.09 | Net fixed Assets t+1 * 0.09 |
4. EBIT (1-2-3) | 1-2-3 | 1-2-3 | 1-2-3 |
5. Interest (10% long-term debt, start year) | Interest t (P&L) | Long-term debt t * 0.10 | Long-term debt t+1 * 0.10 |
Taxable income | 4-5 | 4-5 | 4-5 |
6. Tax (50%) | (4-5) * 50% | (4-5) * 50% | (4-5) * 50% |
7. NET INCOME (4-5-6) | |||
Operating Cash Flow (3+7) | 3+7 | 3+7 | 3+7 |
Step 2: Forecasted External Capital Required
Step 2: Forecasted Amounts of External Capital Required | ||
Sources of capital | t | t+1 |
1. Net income + Depreciation | ||
Uses of capital | ||
2. Increase in NWC NWC = 11% revenues | NWCt - NWCt-1 | NWCt+1 = (11% revenues t+1) Increase = NWCt+1 - NWCt |
3. Investment in fixed Assets. Will be 12.5% of revenues | Gross It - GIt-1 | Revenues t+1 * 0.125 - Investment t - (- depreciation t+1) |
4. Dividend (60% net income) | Dividend t (P&L) | Net Income t+1 * 0.60 |
5. Total uses of funds (2+3+4) | ||
6. External capital required | (+): External capital needed (-): No external capital needed | |
Step 3: Pro Forma Balance Sheet
Step 3: Pro Forma Balance Sheet | ||
t | t+1 | |
1. Net Working Capital | Balance t | NWC = 11% revenues t+1 |
2. Net fixed assets | Balance t | 12.5% revenues t+1 (NO depreciation) |
Total net Assets | Balance t | 1+2 |
3. Long-Term Debt | Balance t | Long-term debt t + External capital required t+1 |
4. Equity | Balance t | Equity t+1 = Equity t + Additional retained earnings |
Total Long-term debt + equity | Balance t | 3+4 |
Additional retained earnings t+1 = Net Income t+1 - Dividend t+1 Internal growth rate: Retained earnings t+1 / Net assets t Maximum growth rate that a company can achieve without external funds. If it wants to grow above this:
| ||