Long-Term Financial Planning - A Long-Term Financial Planning Model for Dynamic Mattress
3 important questions on Long-Term Financial Planning - A Long-Term Financial Planning Model for Dynamic Mattress
What does percentage of sales model mean?
Planning model in which sales forecasts are the driving variable and most other variables are proportional to sales. Most of the new number which we are derived of the new revenues as a percentage.
What is a balancing item?
Variable that adjusts to maintain the consistency of a financial plan. Also called a plug.
What are 6 pitfalls in model design?
1. Many models ignore realities such as depreciation, taxes, etc.
2. Percent of sales methods are not realistic because fixed costs exist
3. Most models generate accounting numbers not financial cash flows
sans-serif4. Adjustments must be made to consider these and other factors
sans-serif5. If factories are operating below full capacity, sales can increase without investment in fixed assets
sans-serif6. Beyond some sales level, new capacity must be added
2. Percent of sales methods are not realistic because fixed costs exist
3. Most models generate accounting numbers not financial cash flows
sans-serif4. Adjustments must be made to consider these and other factors
sans-serif5. If factories are operating below full capacity, sales can increase without investment in fixed assets
sans-serif6. Beyond some sales level, new capacity must be added
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