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1. Consider cash collection items. How can a firm minimize this time and what are some of the costs? Do we worry about this as individuals as well? If so, how?
(Excellent presentation on Cash Management and various ways companies can increase cash collections.(Cash Management by Dr Chitkara) (PDF file of the article is posted in Content – Week 7 – Articles for Discussion Week 7.)
2. How can capital structure decisions affect the control of a firm? In other words, would the control issues impact your decisions on how to raise money for your company?
3. How can sales be used to develop pro forma financial statements?
(Excellent video on Proforma Financial Statements and Preparing a Statement of Cash Flows: https://www.youtube.com/watch?v=9GmekZcOwxQ). citation format is APA. +300 words
Answer: Sales are used to develop pro forma financial statements by projecting expected future sales and trends, which then allow a business to plan for the future. The sales projections help determine how much cash will be needed to fund operations and investments, as well as how much inventory needs to be kept on hand in order to meet customer demand. By projecting future sales, businesses can also better plan their capital structure decisions – such as whether or not they should borrow money or raise equity funds – and make decisions about debt repayment schedules, dividend payments, and other financing activities. Additionally, understanding projected sales helps determine pricing strategies that maximize profits while still allowing a company to remain competitive in the market.
By effectively utilizing pro forma financial statements based off of projected sales figures, companies can anticipate potential financing issues before they arise, identify areas where additional resources may be needed (such as additional personnel), and develop effective strategies for dealing with those issues quickly if they do arise. This type of planning is critical for any firm looking to control its costs and increase profitability in an ever-changing marketplace.
As individuals too we can also benefit from using this strategy when seeking loans or making major purchases like automobiles or houses. For example we could use our current income levels along with estimated increases over time in order to calculate what size payment amount we would need in order to afford a car loan over certain time period without going into debt beyond our means. Pro forma financial planning allows us greater flexibility when budgeting both short term and long term goals while helping minimize risks associated with taking on too much debt or overestimating our ability pay back loans on time each month.