Long-Term Financial Planning & Growth

What is a Pro-Forma Balance Sheet used for?

It is created when using the percentage of sale method and remains unbalanced until external financing needs are determined.

What does the Sustainable Growth Rate (SGR) indicate?

It indicates how much a company can grow without borrowing money.

What is the purpose of a Financial Planning Model's Sales Forecast?

It predicts the percentage growth of a company's sales.

What does the Internal Growth Rate (IGR) measure?

It measures the maximum growth a company can achieve without seeking external financing.

What is the Percentage of Sales Method?

A financial forecasting method used for annual sales growth predictions.

What does a Financial Planning Model assess?

It assesses how business strategies may affect organizations in the future.

What is Resource Allocation in financial planning?

It is the process of deciding how to use resources to achieve organizational goals.

What are Natural Resources?

Valuable items found in nature that can impact business growth.

What is the formula for Internal Growth Rate (IGR)?

Retained Earnings / Total Assets.

What is Financial Control?

Systems established by a business to manage acquisitions and ensure financial resource plans are followed.

What do Economic Assumptions in a Financial Planning Model focus on?

External factors, including weather, economy, and market sector.

What is External Financing?

Sources of finance obtained from outside the company.

What are Capital Investments?

Investments that take a long time to recoup their initial cost.

What is the purpose of a Capital Budget?

To determine how to finance a capital investment.

What does External Financing Needed (EFN) tell us?

It indicates how much outside financing a company requires.

What does Financial Feasibility analyze?

It assesses the financial viability of a business venture by evaluating costs and potential profits.

What is Cash Flow?

The flow of money into or out of a business.

What does the Pro Forma Financial Statement forecast?

It forecasts future financial statements as part of the financial planning model.

What is a Corporate Balance Sheet?

A financial statement that captures assets, liabilities, and owner's equity.

What are Determinants in business growth?

Factors that influence the growth or decline of a company.

What is the formula for External Financing Needed (EFN)?

Change in Assets - Change in Current Liabilities - Retained Earnings.

What is a Budget?

A document used in financial planning to estimate potential revenues and expenses over time.

What is a Master Budget?

A budget containing separate but interrelated budgets that may influence one another.

What is the formula for Forecasted Sales Growth?

Current Sales x (1 + Growth Rate/100).

What is the formula for Percentage of Retained Earnings?

Retained Earnings / Net Income x 100.

What is the purpose of a financial planning model Plug?

It is a backup measure to address potential gaps in a financial plan.