Management and Organizational Studies 2310A/B Chapter 18: Chapter 18

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Danny Morrison

Document Summary

Chapter 18: financial modelling and pro forma analysis. How changes in cost structure will affect free cash flows, financing needs etc. Analyze the impact of potential business plans: to consider a fundamental change in the firms business plan, the financial manager models the firm as a whole, rather than just a business project. Plan for future funding needs: building a model for long term forecasting reveals points in the future at which the firm will need additional external financing eg. when retained earnings will not be anough to fund capital investment. In perfect capital market, it is unnecessary, yo would be able to secure financing immediately for any positive npv project. 18. 2 forecasting financial statements: the percent of sales method. Percent of sales method: a forecasting method that assumes that as sales grow many income statement and balance sheet items will grow, maintaining the same percentage of sales.