ACTG 3000 Lecture Notes - Lecture 6: Cash Flow Statement, Inventory Turnover, Sensitivity Analysis
13 May 2016
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Document Summary
Zero base budgeting approach don"t look at historical trends. Sometimes historical is not representative of the company. Look at the direction that the company is going in. Outcome: free cash flow and valuation of the company the bottom line. On the b/s capital assets, working capital (this drives day to day ops) Working capital inventory, receivables and payables. Sensitivity analysis what if (high and low end possibilities) Start with the income statement to understand profitability of the statement. Co-sharing sharing the revenue stream: look at what alliances they have and how that saves costs or increases revenue and the impact on the forecast. Step 2: look at expenses: percentage of sales, cost of sales , cost of employment look at synergism. Step 3: working capital: must look at assets and liabilities, go based on the ratios inventory turnover and a/r turnover, cash flow statement must be there. Need normalizing income the end so take out an unusual items.
