CHAPTER 16 14FINANCIAL PLANNING AND FORECASTING

Managements are required to make judgments, estimates and assumptions that affect the application of policies; assets, liabilities, income and expenses in order to prepare consolidated financial statements. These assumptions and estimates are critical and they are made in

c. The amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed.

* If we surmise that the company’s specialist’s predictions of 4% on market growth along with renewing current and or adding more customer contracts then the profits should be as follows:

A long-term financial plan begins with strategy. Typically, the senior management team conducts an analysis of the markets in which the firm competes. Managers try to identify ways to protect and increase the firm’s competitive advantage in those markets. For example, the first priority of a firm that competes by achieving the lowest production cost in an industry might be to determine whether it should make additional investments in manufacturing facilities to achieve even greater production efficiencies. Of course, being the low-cost producer is difficult if the firm’s fixed assets are chronically underutilized. This type of firm therefore will spend a

1. Currently the organization expects that their forecast for labor requirements is essentially constant from the previous year. Based on this assumption complete the five stages of the planning process:

grow at the current rate. This is because a company must make capital expenditures to continue to exist

The planning process begins with a situation analysis of the external and internal forces affecting the organization.  This examination helps identify and diagnose issues and problems and may bring to the surface alternative goals and plans for the firm.  Next, the advantages and disadvantages of these goals and plans should be evaluated against one another.  Once a set of goals and a plan have been selected, implementation involves communicating the plan to employees, allocating resources, and making certain that other systems such as rewards and budgets are supporting the plan.  Finally, planning requires instituting control systems to monitor progress toward the goals.

2. Which of the following is not one of the five major steps of the financial planning process?

Forecasting numbers and data is an extremely important role in policy making. Economic forecasting plays an integral key role for the decision-making process, helping governments and policy makers to devise major policies and strategies. Many times, there will be an abundant amount of statistical forecasting being done in order to forecast various economic indicators, however the complexity of them changes a lot across different measures. Often times their will be many different sources that have published relatable economic data which conclude of different forecasts for major macroeconomic variables.

The most important thing is that, according to our estimation, the next five-year we will get additional funds needed increasingly with no surplus funds; which means, our assets increase faster than our liabilities. Therefore, our company goes well in the short term future based on this model. In conclusion,

Moving onto the balance sheet, it is safe to assume that the cash position in the firm will increase the rate of the sales growth going forward. In actuality, cash has historically increased faster than the growth of revenue with 2004 being an exception. To calculate the assumption for accounts receivable, inventory, and accounts payable, we averaged the four years worth of data

12. According to the chapter, which of the following is not an acceptable means of maintaining an entrepreneurs’ personal cash flow?

2. Why focus on fixing the forecasts? What are the implications of a poor forecast?

1. Discuss methods (Accounting Policies) your chosen company uses to account for its various items of assets, liabilities, and shareholder equity:

Forecasting demand is the art and science of predicting future demand. There are several different techniques that can be employed alone or in combination with each other, depending upon the firm’s particular situation and the point in the product’s life cycle, and they are further classified as to the time horizon they represent. Forecasts are generally quantitative (relying on historical data) or qualitative (such as variable personal experiences).