Chapter 7

Fund Analysis, Cash-

Flow Analysis, and
Financial Planning

7.1 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 After Studying Chapter 7,
you should be able to:
1. Explain the difference between the flow of funds (sources and
uses of funds) statement and the statement of cash flows –
and understand the benefits of using each.
2. Define "funds" and identify sources and uses of funds and
create a sources and uses of funds statement.
3. Describe the purpose and content of the statement of cash
flows as well as implications that can be drawn from it.
4. Prepare a cash budget from forecasts of sales, receipts, and
disbursements – and know why such a budget should be
flexible.

7.2 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Flow of Funds Statement '
the chenge
what s
inwealth ,

A summary of a firm’s changes in ⼀

financial position from one period to

⼀

another; it is also called a sources and

uses of funds statement or a statement
of changes in financial position.

7.3 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Flow of Funds Statement

What are “funds”?

All of the firm’s investments and

claims against those investments.
Extends beyond just transactions
involving cash. 不单单只是 cash

7.4 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Analyzing the Sources
and Uses Statement

Sources 来源 ,

Uses
Primarily through Primarily through an
net profit from increase in
bwy inventories
( operations and inventories and
long-term debt or expenditures on
machines new

stock issuance] capital assets, and

payment of debt or
dividends
7.5 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Sources and Uses

irabinity & iquity

)

The letters labeling the Cassets )

boxes stand for Uses,

Sources, Assets, and A L&E
Liabilities & Equity
(broadly defined). The
pluses (minuses)
indicate increases S – + 很多
发⾏出去
Bond
等
来筹钱
(decreases) in assets
or liabilities & equity.
+ –
U
只物⼗⼗
7.6 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
⼀⼀配
 BW’s Determination
of Sources and Uses
Assets 2007 2006 +/– S/U
Cash $ 90 $ 100 – S
Acct. Rec. 394 410 – S
Inventories 696 616 + U
Prepaid Exp 5 5 –
Accum Tax Prepay 10 9 + U
Current Assets $ 1,195 $ 1,140 N/A
Fixed Assets (@Cost) 1030 930 N/A
Less: Acc. Depr. (329) (299) N/A
Net Fix. Assets $ 701 $ 631 + U
Investment, LT 50 50 –
Other Assets, LT 223 223 –
Total Assets $ 2,169 $ 2,044
7.7 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 BW’s Determination
of Sources and Uses
Assets 2007 ← 2006 +/– S/U
Cash $ 90 $ 100 ⼀

$10 S
Acct. Rec. 394 410 ⼀
16 S
Inventories 696 616 f 80 U
Prepaid Exp 5 5 –
Accum Tax Prepay 10 9 f 1 U
Current Assets $ 1,195 $ 1,140 N/A
Fixed Assets (@Cost) 1030 930 N/A
Less: Acc. Depr. (329) (299) N/A
看断 Net Fix. Assets $ 701 $ 631 4
70 U
Investment, LT 50 50 –
Other Assets, LT 223 223 –
Total Assets $ 2,169 $ 2,044
7.8 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 BW’s Determination
of Sources and Uses
Liabilities and Equity 2007 2006 +/– S/U
Notes Payable $ 290 $ 295 – U
Acct. Payable 94 94 –
Accrued Taxes 16 16 –
Other Accrued Liab. 100 100 –
Current Liab. $ 500 $ 505 N/A
Long-Term Debt 530 453 + S
Shareholders’ Equity
Com. Stock ($1 par) 200 200 –
Add Pd in Capital 729 729 –
Retained Earnings 210 157 + S
Total Equity $ 1,139 $ 1086 N/A
Total Liab/Equity $ 2,169 $ 2,044
7.9 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 BW’s Determination
of Sources and Uses
Liabilities and Equity 2007 2006 +/– S/U
Notes Payable $ 290 $ 295 ⼀

$ 5 U
Acct. Payable 94 94 –
Accrued Taxes 16 16 –
Other Accrued Liab. 100 100 –
Current Liab. $ 500 $ 505 N/A
Long-Term Debt 530 453 ⼗
77 S
Shareholders’ Equity
Com. Stock ($1 par) 200 200 –
Add Pd in Capital 729 729 –
Retained Earnings 210 157 Ψ
53 S
Total Equity $ 1,139 $ 1086 N/A
Total Liab/Equity $ 2,169 $ 2,044
7.10 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 “Basic” Sources
and Uses Statement
SOURCES
Decrease, Cash 10
Decrease, Accounts Receivable 16
Increase, Long-Term Debt 77
Increase, Retained Earnings $ 53
USES $156
Increase, Inventories $80
Increase, Net Fixed Assets 70
Increase, Accum Tax Prepay 1
Decrease, Notes Payable 5
$156
7.11 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Statement of Cash Flows
A summary of a firm’s payments
during a period of time.
This statement reports cash inflows
and outflows based on the firm’s
operating activities,
investing activities, and
financing activities.
7.12 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Statement of Cash Flows
Cash Flow from Operating Activities

Shows impact of transactions not

defined as investing or financing
activities.
• These cash flows are generally the cash
effects of transactions that enter into the
determination of net income.

7.13 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Cash Flow From
Operating Activities
Cash Inflows
⼀
From sales of goods or services
… From interest and dividend income
from

m
(from different companies)
Cash Outflows
To pay suppliers for inventory

{
To pay other suppliers for other
operating expenses
To pay employees for services
To pay government for taxes
To pay lenders (interest)
7.14 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Cash Flow From
Operating Activities
It would seem more logical to classify
interest and dividend income as an
“investing” inflow, while interest paid
certainly looks like a “financing”
outflow.
σ
But, the US Financial Accounting Standards
Board – by a slim 4 to 3 vote – classified these
items as “operating” flows.

7.15 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Statement of Cash Flows
Cash Flow from Investing Activities
Shows impact of ⑥ buying andO selling
— fixed assets and debt or equity
securities of other entities. ⼀

Cash Flow from Financing Activities

Shows impact of all cash transactions
with shareholders and the borrowing
—
quy
and repaying transactions with lenders. ⼀

liahitity
7.16 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Cash Flow From
Investing Activities
⼀

Cash Inflows mchine

From sale of fixed assets (property, plant,

⼀

equipment)
From sale of debt or equity securities of
other
…
entities
Cash Outflows
To acquire fixed assets (property, plant,
equipment)
To purchase debt or equity securities of
other entities
⼀
7.17 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Cash Flow From
Financing Activities
⼀

Cash Inflows
From borrowing
From the sale of the firm’s own equity
…
securities
⼀
Cash Outflows
To repay amounts borrowed
To pay shareholders dividends
To repurchase the firm’s own equity
⼀
securities
⼀
7.18 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Cash Flow Statements

 Indirect Method 更简单

Making adjustments for non-cash items from ⼀⼀

Income Statement

 Direct Method

Directly examining transactions that involve

exchange of cash
⼀

7.19 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Indirect Method –
Statement of Cash Flows
Cash Flow from Operating Activities
searning after
tax

= Net Income )EAT

+ Depreciation Expense
- ∆Current Assets (minus increases, plus decreases) Allotont 了 Veteivable

这⽐收到 3 cash
+ ∆Current Liabilities (plus increases, minus decreases) ↑ Cash

ibtoie . unts poyobie d pay 3cashasbd

** Since we are adjusting for non-cash items, we exclude

cash changes in the computation
** Since a change in notes payable is a financing activity,
we exclude this item in the computation

7.20 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 BW’s Balance Sheets
Assets 2007 2006

“
Cash $ 90 $ 100

≥
Acct. Rec. 394 410
Inventories 696 616
Prepaid Exp 5 5
Accum Tax Prepay 10 9
Current Assets $ 1,195 $ 1,140
Fixed Assets (@Cost) 1030 930
Less: Acc. Depr. (329) (299)
Net Fix. Assets $ 701 $ 631
Investment, LT 50 50
Other Assets, LT 223 223
Total Assets $ 2,169 $ 2,044
7.21 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 BW’s Balance Sheets
Liabilities and Equity 2007 2006
Notes Payable $ 290 $ 295
Acct. Payable 94 94
Accrued Taxes 16 16
Other Accrued Liab. 100 100
Current Liab. $ 500 $ 505
Long-Term Debt 530 453
Shareholders’ Equity
Com. Stock ($1 par) 200 200
Add Pd in Capital 729 729
Retained Earnings 210 157
Total Equity $ 1,139 $ 1086
Total Liab/Equity $ 2,169 $ 2,044
7.22 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Basket Wonders’
Income Statement
Basket Wonders Statement of Earnings (in thousands)
for Year Ending December 31, 2007a
Net Sales b $ 2,211 a. Measures profitability over a
Cost of Goods Sold 1,599 time period.
Gross Profit $ 612 b. Received, or receivable, from

∞
Depreciation Expense 30
customers.
c. Selling, General &
SG&A Expenses c 372 Administrative:
EBITd $ 210 advertisement, officers’
Interest Expensee 59 salaries, etc.
EBT f $ 151 d. Operating income.
Income Taxes 60 e. Cost of borrowed funds.
∞EATg $ 91 f. Taxable income.
Cash Dividends 38 g. Amount earned for
Increase in RE $ 53 shareholders.
7.23 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Indirect Method –
Statement of Cash Flows
Cash Flow from Operating Activities
Net Income $ 91
⼀

Depreciation expense 30
Decrease, Accounts receivable 16
「 Increase, Inventories
Increase, Accum. tax prepay
( 80)
( 1)

Net cash provided (used) by

operating activities $ 56

7.24 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Indirect Method –
Statement of Cash Flows

Cash Flow from Investing Activities

→

Additions to Fixed Assets $(100)

Net cash provided (used) by

investing activities $(100)

7.25 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Indirect Method –
Statement of Cash Flows
Cash Flow from Financing Activities

Decrease, notes payable $ ( 5)

Increase, long-term debt 77
Dividends paid ( 38)

Net cash provided (used) by

financing activities $ 34

7.26 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Indirect Method –
Statement of Cash Flows
5b + 34
-

100

「
Increase (decrease) in cash $ ( 10)
Cash, 2006 100
Cash, 2007 $ 90

7.27 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 不要求掌握
Direct Method –
Statement of Cash Flows
Cash Flow from Operating Activities

Cash received from customers $2,227

Cash paid to suppliers (1,679)
SGA paid (372)
Interest paid ( 59)
Taxes paid ( 61)
Net cash provided (used) by
operating activities $ 56

7.28 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Worksheet for Preparing
Operating Activities
menoddiret
(Reference Slide)X
 A/R2006 + Sales – Cash Collection = A/R2007
410 + 2211 - Cash Collection = 394

 Inv2006 – A/P2006 – COGS +Cash Payment to Suppliers =

Inv2007 – A/P2007
616 – 94 – 1599 + Cash Payment to Suppliers =
696 – 94

 Tax prepay2006 – Tax liab2006 + Cash payment of tax - Tax expense

= Tax prepay2007 – Tax liab2007
9 – 16 + Cash payment of tax – 60 = 10 – 16
7.29 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 不要求掌握
Direct Method –
Statement of Cash Flows

Cash Flow from Investing Activities

Additions to Fixed Assets $(100)

Net cash provided (used) by

investing activities $(100)

7.30 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Direct Method –
Statement of Cash Flows

Cash Flow from Financing Activities

Decrease, notes payable $ ( 5)

Increase, long-term debt 77
Dividends paid ( 38)

Net cash provided (used) by

financing activities $ 34

7.31 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Direct Method –
Statement of Cash Flows
Increase (decrease) in cash $ ( 10)
Cash, 2006 100
Cash, 2007 $ 90

7.32 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Financially Healthy
Company
am
amumus a
}
n

|
• Operating: Positive 赚更多线
• Investing: Negative 美多imentory, conn
outfton

• Financing: Go back and forth

between positive and negative

7.33 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Cash Flow Forecasting
A Cash Budget is a forecast of a firm’s future
cash flows arising from collections and
、

disbursements, usually on a monthly basis.

3 :
⽀出

The financial manager is better able to:

• Determine the future cash needs of the firm
• Plan for the financing of these needs
• Exercise control over cash and liquidity of
the firm
7.34 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 销售代表预测有关期间的销售(在他们控制或管理下的销售)。
对产品线的销售预测进⾏筛选和整合。
产品线销售预测合并为单个预测。
The Sales Forecast
Internal Sales Forecast
⼈
• ( Sales representatives ] project sales
预测
for the period in question (sales
under their control or management).
• Sales projections are screened and
预测
consolidated for product lines.
整分
• Product line sales projections are
consolidated into a single forecast.
7.35 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 The Sales Forecast
External Sales Forecast
• Economists project overall
economic and business trends that
will affect the firm.
• Expected market share is projected
for current and new product lines.
• Product line sales projections are
consolidated into a single forecast.
7.36 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 BW’s Cash Flow Forecast
Lisa Miller has finalized a cash flow
forecast for the first six months of 2008.
Lisa is expecting 90% of monthly sales
will be credit sales with 80% of credit
sales collected in 30 days, 20% in 60 days,
and no “bad debts.” 「 品
[ 品
Also, she predicts that BW can delay the
payment of inventory purchases by 30
days.
7.37 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Collections and Other
Cash Receipts (Thousands)
SALES NOV DEC JAN FEB
Credit Sales, 90% $193 $212 $154 $135
Cash Sales, 10% 21 24 17 15
Total Sales, 100% $214 $236 $171 $150

CASH COLLECTIONS
Cash sales, current $ 17 $ 15
80% of last month’s 212 × 8170
0 .

123
credit sales
20% of 2-month-old 193 × 0 2
.

39 42
credit sales
Total cash receipts $226 $181
7.38 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Collections and Other
Cash Receipts (Thousands)
SALES MAR APR MAY JUN
Credit Sales, 90% $256 $205 $160 $190
Cash Sales, 10% 28 23 18 21
Total Sales, 100% $284 $228 $178 $211

CASH COLLECTIONS
Cash sales, current $ 28 $ 23 $ 18 $ 21
80% of last month’s 108 204 164 128
credit sales
20% of 2-month-old 31 27 51 41
credit sales
Total cash receipts $167 $254 $233 $190
7.39 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Schedule of Projected Cash
Disbursements (Thousands)
DEC JAN FEB
Purchases $ 39 $ 35 $ 64
CASH DISBURSEMENTS FOR PURCHASES
AND OPERATING EXPENSES ↓

θ
100% of last month’s $ 39 $ 35
purchases
SG&A to be paid as cash 34 34
Other expense to be paid as cash 90 94
Total disbursements (purchases "
and operating expenses) $163 $163
7.40 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Schedule of Projected Cash
Disbursements (Thousands)
MAR APR MAY JUN
Purchases $ 53 $ 40 $ 48 $ 50
CASH DISBURSEMENTS FOR
PURCHASES AND OPERATING
EXPENSES

100% of last month’s $ 64 $ 53 $ 40 $ 48

purchases
SG & A 34 34 34 34
Other expense 111 107 92 92
Total disbursements $209 $194 $166 $174
(purchases and
related expenses)

7.41 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Schedule of Net Cash
Disbursements (Thousands)
JAN FEB MAR

Total disbursements for $163 $163 $209

purchases and related
expenses
Income taxes ⼗
25 0 0
Capital expenditures 70 40 0
Dividend payments 0 0 9
Total cash disbursements $258 $203 $218

7.42 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Schedule of Net Cash
Disbursements (Thousands)
APR MAY JUN

Total disbursements for $194 $166 $174

purchases and operating
expenses
Income taxes 25 0 0
Capital expenditures 0 0 0
Dividend payments 0 0 10
Total cash disbursements $219 $166 $184

7.43 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Projected Net Cash
Flows and Cash Balances
JAN FEB MAR
Beginning cash balance $ 90 $ 58 $ 35

“
Total cash receipts 226 181 167
Total cash disbursements 258 203 218
Net cash flow $( 32) $( 22) $( 51)
Ending cash balance
without additional financing $ 58 $ 35 $( 16)

7.44 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Projected Net Cash
Flows and Cash Balances
APR MAY JUN
Beginning cash balance $( 16) $ 20 $ 87
Total cash receipts 254 233 190
Total cash disbursements 219 166 184
Net cash flow $ 35 $ 67 $ 6
Ending cash balance
without additional financing $ 20 $ 87 $ 93

7.45 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Review from Last Class

 Flow of Fund Statement

 Sources and Uses
 Cashflow statements
 Operating, Investing, Financing

7.46 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Review from Last Class
guaa d

om
,
resisitpep
mpme
 Suppose Company ABC had revenues
of $100, COGS of $10, depreciation
expense of $30, SGA expense of $10
and tax rate of 10% in 2020. In 2019, it
had inventories of $20 and accounts
payable of $30. In 2020, it had
inventories of $25, and accounts
payable of $40. What was the operating
cashflow in 2020? C 100 10 30 )
toghtinome 45 =
- -
-
10 =

7.47 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Review from Last Class
 Net income = (100-10-30-10)*0.9 = 45
 Changes in inventories = 25 – 20 = 5
 Changes in accounts payable = 40- 30 = 10
 Operating CF
= Net Income + Dep. Expense
- ∆Current Assets + ∆Current Liabilities
= 45 + 30 – 5 +10 = 80 (inflow)
⼀

7.48 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Range of
Cash-Flow Estimates
Examine factors that may influence cash
receipts进现
such as changes in the state of the
economy that influence consumer buying
decisions and pricing strategies.
Examine factors that may influence cash
<

disbursements
了
:
φ
such as changes in the state
of the economy that impact operations,
capital expenditures, and dividend
payments.
7.49 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Management Uncertainty
in Ending Cash Balances
January Distribution
PROBABILITY OF
OCCURRENCE

$42 $51 $60 $69 $78

≡
ENDING CASH BALANCE
dvferbont Sinar, 0 会报的
(thousands)
7.50
Edoun
g
cah balale ,
会有⽅同的权概静
Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Summary of the Range
of Cash-Flow Estimates
• Allows examination of the
relevant factors which may
generate uncertainty regarding
future cash flows.
• Enables management to better 、

plan for contingencies that will

编发事件
arise than using a single-point
estimate of monthly cash flows.
7.51 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Forecasting
Financial Statements
Expected future financial statements
~ 反只是 cashy
based on conditions that the
management expects to exist and
actions it expects to take.

7.52 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Forecasting BW’s
Income Statement
Lisa Miller is forecasting the income statement
for 2008. She estimates that sales for the 6 ⼀

months ended June 30 will be $1,222,000.

⼀

COGS are estimated from the average of years

2005 through 2007. Selling, general, and
administrative costs are forecasted at $31,500
per month, while the income tax rate is
assumed equal to 40%. Cash dividends,
depreciation expense, interest expense are
expected to remain constant.
7.53 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Basket Wonders’ Forecasted
Income Statement
Basket Wonders Forecasted Statement of Earnings (in
thousands) for Six Months Ending June 30, 2008
Net Salesa $ 1,222 a. From sales budget.
Cost of Goods Sold b 865
b. Average of 68.7%,
Gross Profit $ 357
71.3%, and 72.3%
Depreciation Expense c 15 不⼀⻚⾥ 项 30

189 因为这客是 同个 multiplied by net

6
SG&A Expenses d
EBIT $ 153 sales.(70.77%9of 1222)
39 法 =
68 79
.
.
+ Y 1 .

. tiz 1

Interest Expensee 29 c. 0.5 * 30,000 = $15,000

EBT $ 124 d. $31,500 x 6 months.
Income Taxes 50 124 e.Ψ Assumed to be $29,000.
× 0 .

EAT $ 74 f. Did not change. Six (6)

Cash Dividendsf f 19
←
38
months of dividends =
Increase in RE $ 55
7.54
(0.5)($38,000) = $19,000.
Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
 Basket Wonders’
Income Statement
Basket Wonders Statement of Earnings (in thousands)
for Year Ending December 31, 2007a ⼀

Net Sales b $ 2,211 a. Measures profitability over a

Cost of Goods Sold 1,599 time period.
Gross Profit $ 612 b. Received, or receivable, from

∞
Depreciation Expense 30
customers.
c. Selling, General &
SG&A Expenses c 372 Administrative:
EBITd $ 210 advertisement, officers’
Interest Expensee 59 salaries, etc.
EBT f $ 151 d. Operating income.
Income Taxes 60 e. Cost of borrowed funds.
∞EATg $ 91 f. Taxable income.
Cash Dividends 38 g. Amount earned for
Increase in RE $ 53 shareholders.
7.23 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.