The budgets are the forecasts of all parts of our activity. They are expressed without taxes, except the cash budget. The budgets allow to draw the pro forma financial statements: budgeted profit and loss account and balance sheet as well as a sources-and-uses statements.
The sales forecast = 1st step for all the budgets The methods to forecast sales are
- market studies (panels, market-tests)
- statistical methods (regression equations, mobiles means, ...): pb because it is an implicit assertion that the past can explain the present.
The production budgets are closely linked to the sales budgets. They use mathematical tools (matrices, operational research, ...) and are generally conducted by the technical staff rather than by the financial manager.
The cash budget
We’ll develop only the monthly cas budget, but to optimize short-term financial planning, firms should use daily cash reports.
The necessary elements to build the cash budget of the current year are:
- the balance sheet of the previous year,
- all the budgets of the current year,
- the payment conditions of the company
- the exceptional expenses that have not been budgeted.
The company’s book balance is not relevant because we want to know the current level of outflows and inflows and not what is recorded in accountancy.
The financial manager can use the cash budget to identify short-term financial needs. The cash budget tells the manager what borrowing is required or what lending will be possible in the short run.
Inventory management >>
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Corporate finance
The subject: corporate finance
PART ONE: CAPITAL EXPENDITURE
The present value
Investment
decisions
Practical
problems in capital budgeting
Firms evaluation
PART TWO. BASICS OF FINANCE
The financial
markets
Options
The market
efficiency
Risk
Mergers,
Acquisitions, and Corporate Control
International
Financial Management
PART THREE FINANCING DECISIONS
Corporate
financing
Dividend policy
and capital structure
PART FOUR FINANCIAL MANAGEMENT
Financial
planning
Short-term
financial management
Courses created and updated by Dr David Chelly, PhD in Management sciences from the University of Tours.
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