Controlling as a Management Function

Jun 28th, 2015
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Planning is a function that determines in advance what should be done. It consists of selecting the enterprise objectives, policies, programmes, procedures and other means of achieving these objectives. In his planning, the manager must decide which of the alternative plans are to be followed and executed. Planning is intellectual in nature. It is a mental work. It is thinking ahead and preparing for the future. - Theo Haimann

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CHAPTER 17Financial Planning andForecastingForecasting salesProjecting the assets andinternally generated fundsProjecting outside funds neededDeciding how to raise funds17-1Balance sheet (2002),in millions of dollarsCash & sec.Accounts rec.InventoriesTotal CANet fixedassetsTotal assets$20 Accts. pay. &accruals240 Notes payable240Total CL$ 500 L-T debtCommon stockRetained500 earnings$1,000Total claims$ 100100$ 200100500200$1,00017-2Income statement (2002),in millions of dollarsSalesLess:Var. costs (60%)Fixed costsEBITInterestEBTTaxes (40%)Net incomeDividends (30%)Addn to RE$2,000.001,200.00700.00$ 100.0016.00$ 84.0033.60$ 50.40$15.12$35.2817-3Key ratiosBEPProfit marginROEDSOInv. turnoverF. A. turnoverT. A. turnoverDebt/assetsTIECurrent ratioPayout ratioNWC10.00%2.52%7.20%43.80 days8.33x4.00x2.00x30.00%6.25x2.50x30.00%IndustryCondition20.00%Poor4.00%15.60%32.00 days11.00x5.00x2.50x36.00%Good9.40xPoor3.00x30.00%O. K.17-4Key assumptionsOperating at full capacity in 2002.Each type of asset grows proportionallywith sales.Payables and accruals growproportionally with sales.2002 profit margin (2.52%) and payout(30%) will be maintained.Sales are expected to increase by $500million. (%S = 25%)17-5Determining additional fundsneeded, using the AFNequationAFN = (A*/S0)S (L*

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