Financial Management Financial Forecasting Aug 6, 2010

Table of Contents FINANCIAL FORECASTING...........................................................................................2 Usefulness of Financial Forecasting.........................................................................2 II. Limitations of Financial Forecasting.................................................................2 III. Cases when a company may not find forecasting a justifiable investment......2 IV. Financial Forecasting Techniques .....................................................................2 Subjective Forecasting (Judgmental Approach)...................................................2 Trend Analysis ........................................................................................................3 Correlation Forecasting...........................................................................................7 FORECAST FINANCIAL STATEMENTS...........................................................................8 FORECAST INCOME STATEMENT..............................................................................9 FORECAST BALANCE SHEET..................................................................................10 ASSETS...............................................................................................................11 LIABILITES..........................................................................................................11 CAPITAL..............................................................................................................11 PERCENTAGE OF SALES METHOD ......................................................................13 CASH FORECAST.................................................................................................14 PROBLEM: PROFORMA BALANCE SHEET WITH CHOICE OF FINANCING...................16