Be Global Leaders

PROFIL PRODI
UNIVERSITAS PERTAMINA

Chapter 8 :
Financial Planning and Forecasting
Strategi Planning

Mission Statement
A condensed version of a Corporate Scope
firm’s strategic plan
Defines a firm’s lines of Statement of Corporate Objectives
business and geographic
areas of operation Sets forth specific goals to Operating Plan
guide management

Provides Financial Plan

Management
detailed The document that
implementation includes
guidance , based on assumptions,
the corporate projected financial
strategy, to help statements and
meet the corporate projected ratio and
objectives ties the entire
planning process
together
 Financial Plan

The Allied plans to increase sales by 10% in 2013,

Increase in sales =
Δ sales = 0,10 ($ 3,000 million) = $300 million

How much assets is needed to support the increasing

of sales ?
 How much asset does Allied needs to
support the increasing of sales ?

10% Δ $ 300

Sales $ 3000 $3300

Assets $ 2000 ??
 How much The Allied does needs Asset to
support the increasing of sales ?

10% Δ $ 300

Sales $ 3000 $3300

0,6667 * $3300 =Δ 200

Assets $ 2000 $2200

Allied had assets $2000 million and sales of $ 3000 million.

It required $ 2000/$3000 = $0,6667 of assets to generate each

dollar of sales.

Allied needs increasing of assets Δ $200 to support increasing of

sales Δ $300
If asset are to grow by $200 million , liabilities and
equity must also grow by the same amount- the
balance sheet must balance.

What are the sources of capital to fund the additional

asset ?
Primary capital Sources
1. Spontaneus increase in accounts payable and accruals

2. Addition to retained earnings

3. AFN additional Funds Nedded

Primary capital Sources

Spontaneus increase in accounts payable and accruals

Funds that arise out of normal business operations from its
supplier, employees and the government (such as account
payable and accrued wages and taxes) that reduce the firms
need for external financing
Primary capital Sources
Addtion to retained earnings
Proportion of net income that is reinvested in the firm. This
addition to retained earning will help finance growth.

Additional Fund Needed

The amount of external capital (interest bearing debt and
preferred and common stock) that will be necessary to acquire
the required assets.
 AFN Equation
An equation that shows the relationship of external fund
needed by a firm to its projected increase in assets, the
spontaneous increase in liabilities and its increase in retained
earnings
EXERCISE

Calculate the Additional Funds Needed (AFN)

Allied plans to increase sales by 10% in 2013,

Part 1 Data from Financial Statement
Ao* asset at 12/31/12 =
S0 = 2012 sales =
2012 net Income =
2012 Dividens =
Lo* (account payable + accrual) =
Part 1 Data from Financial Statement
Ao* asset at 12/31/12 = $ 2000
S0 = 2012 sales = $ 3000
2012 net Income = $ 117,5
2012 Dividens = $ 57,5
Lo* (account payable + accrual) = $ 200
Part 2 Data used in AFN equation
Assets required per $1 of
Ao*/So =
sales
Its calles capital intensity
ratio
S1 Sales in 2013 =
ΔS Growth in sales =
Spontaneously genereted
Lo*/So funds =
M Profit Margin on sales =
2012 net income/So
(1-Dividend Payout Ratio) 1- Dividen/Net Income =
Part 2 Data used in AFN equation
Assets required per $1 of
Ao*/So =
sales 0,6667
Its calles capital intensity ratio
S1 Sales in 2013 = 3300
ΔS Growth in sales = 300
Spontaneously genereted
Lo*/So funds = 0,0667
M Profit Margin on sales = 0,0392
2012 net income/So
(1-Dividend Payout Ratio) 1- Dividen/Net Income = 0,5106
AFN Equation
 AFN Equation

0,6667($300) - 0,0667($300) - 0,0392($3300)($0,5106)

$200 $20 $66

= $114
Construct The Allied’s Balance Sheet and
Income Statement Forecasting
2012 Change 2013
Sales
Operating cost (includes
depreciation)
EBIT
Interest Expense
EBT
Taxes
Net Income (NI)
Dividends (49%)
Retained Earning (51%)
 2012 Change 2013
Cash
AR
Inventories
Fixed Assets
Total Asset
2012 Change 2013
Payable+accruals
Short term bank loan
Total current liabilities
Long term bonds
Total Debt
Common Stock
Retained Earning
Total Common Equity
Total Liability and
Equity
 2012 Change 2013
Sales 3000 10% 3300
Operating cost (includes
depreciation) 2716 0,9053 2987,6
EBIT 284,00 312,4
Interest Expense 88 0,0293 96,8
EBT 196,00 215,6
Taxes 40% 78,3 86,24
Net Income (NI) 117,70 129,36 Addition to
Dividends (49%) 57,5 63 retained earnings

Retained Earning (51%) 60,00 66

 2012 Change 2013
Cash 10 0,003 11
AR 375 0,125 412,5
Inventories 615 0,205 676,5
Fixed Assets 1000 0,333 1100
Total Asset 2000 2200
 2012 Change 2013
Cash 10 0,003 11
AR 375 0,125 412,5
Inventories 615 0,205 676,5
Fixed Assets 1000 0,333 1100
Total Asset 2000 2200
Spontaneous
funds
2012 Change 2013
Payable+accruals 200 0,067 220 20
Short term bank loan 110 110
Total current liabilities 310 330
Long term bonds 750 750
Total Debt 1060 1080
Common Stock 130 130 AFN
Retained Earning 810 66 876
Total Coomon Equity 940 1006
Total Liability and Equity 2000 2086 114
EXERCISE

• In 2013Morrisey
will increase
sales by 10%
over 2012

• Calculate the
AFN of Morrisey

• Share Outs
100,000