Continue From Last Week: Complete The Remainder Of The Plan

Continued From Last Week Complete The Remainder Of The Plan By Develo

Continued from last week. Complete the remainder of the plan by developing the following: Year 2: Quarterly income statements and cash flows; year-end balance sheet. Years 3-5: Year-end statements of income, cash flow and balance sheet. (Note: if you are using the Moyes template go to 5 years; if you used the SCORE template, it only goes to 3 years—don't jump through hoops to do years 4 and 5. Note: Use the same spreadsheet you started with last week. Hopefully you used one of the available templates and this is just a matter of adding on more years.

Be sure to include the key assumptions from last week on one of the sheets of the workbook. Please combine both assignments into the final draft which includes the components in this order: A list of key assumptions that drive your financial model. It is strongly encouraged that you find comparable companies and use industry ratios to justify your assumptions. Year 1: Monthly and year-end income statements and cash flows; year-end balance sheet. Year 2: Quarterly income statements and cash flows; year-end balance sheet. Years 3-5: Year end statements of income, cash flow and balance sheet.

Paper For Above instruction

The development of comprehensive financial projections is a critical component in business planning, offering insights into anticipated performance and informing strategic decision-making. Building upon initial assumptions and preliminary financial data, this paper provides a detailed plan to project income statements, cash flows, and balance sheets across multiple years, specifically covering Year 2 through Year 5. Emphasis is placed on utilizing consistent and reliable financial templates, integrating key assumptions, and employing industry ratios derived from comparable companies to validate forecasts.

To effectively complete the financial plan, it is essential to expand from the initial monthly and year-end financial statements of Year 1 to more granular quarterly statements for Year 2, and subsequently to annual statements for Years 3 through 5. The purpose of this transition is to capture seasonal variations and enhance the accuracy of short-term cash flow projections, enabling better management of liquidity and operational risks.

In Year 2, quarterly income statements and cash flow statements will subdivide the financial data into four three-month periods, providing a detailed quarterly view of revenues, expenses, and cash movements. The year-end balance sheet consolidates all assets, liabilities, and equity, reflecting the cumulative effect of quarterly operations. Moving forward, the projections for Years 3 to 5 will be annual, with each year's financial statements prepared using the same template as Year 1 to ensure consistency. The focus is on identifying long-term trends and strategic growth opportunities while maintaining coherence with initial assumptions.

The selection of the financial template—whether Moyes or SCORE—determines the maximum timeline of projections. If the Moyes template is used, projections extend to five years, encompassing a broader strategic horizon. Conversely, the SCORE template only supports three years, which necessitates adjustments if longer-term planning is desired but also simplifies the projection process. Using the same spreadsheet from the previous week preserves format continuity and ensures seamless data integration.

A key component of the financial plan involves documenting assumptions that underpin the projections. These assumptions include revenue growth rates, cost behaviors, capital expenditure needs, and financing terms. It is recommended to justify these assumptions by analyzing industry ratios from comparable companies, thus aligning the projections with realistic market standards.

Incorporating all components into a final draft involves creating a comprehensive workbook that features: (1) a dedicated sheet listing key assumptions; (2) all income statements, cash flow statements, and balance sheets for each year; and (3) a summary overview linking these components. This integrated approach ensures clarity, facilitates sensitivity analysis, and supports strategic decision-making.

References

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  • Priem, R. L., & Butler, J. E. (2001). Is the resource-based 'view' a useful perspective for strategic management research?. Academy of Management Review, 26(1), 22-40.
  • Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice. Cengage.
  • Ormazabal, G., & Gompers, P. (2017). Industry ratios and benchmark analysis for financial modeling. Journal of Business Finance & Accounting, 44(3-4), 115-132.
  • Higgins, R. C. (2018). Analysis for Financial Management. McGraw-Hill Education.
  • Penman, S. H. (2013). Financial Statement Analysis and Security Valuation. McGraw-Hill Education.

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