Financial Forecasting, Analysis and Modelling by Michael Samonas

Author:Michael Samonas [Samonas, Michael]
Language: eng
Format: epub
ISBN: 9781118921098
Publisher: Wiley
Published: 2014-11-24T00:00:00+00:00

Exhibit 4.30 Tool calculating funding needs for certain annual turnover and credit days

The figures in the table in Exhibit 4.30 have been derived by using the following formula already described in Chapter 2:

Using similar formulae we may forecast the inventory and accounts payable given a certain Cost of Goods Sold (COGS) figure. Following this approach we have forecast the balance sheet accounts of accounts receivable, inventory, and accounts payable for SteelCo, as shown in Chapter 3, for years 2014 to 2017. When we have to forecast working capital this is how we will always do it:

We will forecast revenues and annual turnover as we discussed in Section 4.3.

We will forecast COGS directly or indirectly as we discussed in Section 4.4.

We will make assumptions about the future Days Sales Outstanding (DSO), Days Payable Outstanding (DPO), and Days Inventory Outstanding (DIO), and

Based on the figures of the above steps we will forecast accounts receivable, accounts payable, and inventory.

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