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Chapter 04 - Long-Term Financial Planning and Growth
4-1
CHAPTER 4
LONG-TERM FINANCIAL PLANNING AND GROWTH
CHAPTER WEB SITES
CHAPTER ORGANIZATION
4.1 What Is Financial Planning?
4.2 Financial Planning Models: A First Look
4.3 The Percentage of Sales Approach
The Income Statement
4.4 External Financing and Growth
Chapter 04 - Long-Term Financial Planning and Growth
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ANNOTATED CHAPTER OUTLINE
4.1. What is Financial Planning?
A. Growth as a Financial Management Goal
B. Dimensions of Financial Planning
Lecture Tip: Students may grasp the notion of best- and worst-
case scenarios only incompletely without realizing it. They often
C. What Can Planning Accomplish?
4.2. Financial Planning Models: A First Look
A. A Financial Planning Model: The Ingredients
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B. A Simple Financial Planning Model
Lecture Tip: Some students may suggest that the effects of
aggregation produce “unrealistic” results. While this is correct, it
4.3. The Percentage of Sales Approach
A. The Income Statement
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Given forecasted sales, a constant profit margin, and a specified
B. The Balance Sheet
What assets are needed to support sales growth? If we assume that
Lecture Tip: In the first three chapters of the text, we have
described “the financing decision” in one of two ways: either in
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4.4. External Financing and Growth
All else equal, more growth means more external financing will be needed.
Lecture Tip: You might point out that the relationship between firm growth and
external financing needs is of utmost importance to firms in the early stages of
A. EFN and Growth
Lecture Tip: For new firms, internal financing is often virtually
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B. Financial Policy and Growth
Lecture Tip: Some students will wonder why managers would wish
Lecture Tip: Wanting sales or revenues to grow by X% per year as
a goal of the firm is properly understood as meaning: “All else
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C. A Note on Sustainable Growth Rate Calculations
4.5. Some Caveats Regarding Financial Planning Models
4.6. Summary and Conclusions
