FIN 300 Lecture Notes - Lecture 3: Dividend Payout Ratio, Planning Horizon, Accounts Payable
Document Summary
Fin300 - lecture 3 - long-term financial planning and corporate growth. From investment opportunities, result of firms capital budgeting decision. Amount of borrowing used to finance investments, capital structure policy. Planning horizon: long range time period the financial planning process focuses on, usually 2- Aggregation: smaller investment proposals of each of a firm"s operational units are added up and treated as one big project. Make pessimistic assumptions about products and economy. Requires details of cost cutting, divestiture, liquidation. May involve new products, expansion, detail financing to fund these. Pro forma statements: comprehensive income/financial position/statement of cash flows. Cash surplus/shortfall (plug): external financing needed to balance position. Percentage of sales approach: accounts are projected depending on firm"s predicted sales level, assumes accounts tied to sales, check if reasonable assumption. When item does not vary directly with sales -- write n/a . Ex) notes payable, long term debt, common stock.
