From the course: Financial Modeling and Forecasting Financial Statements
Join today to access over 24,900 courses taught by industry experts.
The impacts of financing choices
From the course: Financial Modeling and Forecasting Financial Statements
The impacts of financing choices
- Now that we know that Derrald Company expects to need $1,090 in assets in Year 2, we need to determine where Derrald will get the money to buy those assets. One easy source of financing the forecast is the amount of accounts payable. Accounts payable represents the operational financing provided by the suppliers. As with the other financial statement items that increase naturally, accounts payable also increase as naturally as sales increases. So if sales are expected to increase by 50%, then inventory purchases are also expected to increase by 50%, and supplier financing will also increase by about 50%. In Year 2, accounts payable will increase to $150 from the $100 in Year 1. The level of long-term debt and of stockholder's equity is determined by management's decisions on how to best obtain financing. In fact, management often uses forecasted financial statements prepared under a variety of different financing…
Practice while you learn with exercise files
Download the files the instructor uses to teach the course. Follow along and learn by watching, listening and practicing.
Download courses and learn on the go
Watch courses on your mobile device without an internet connection. Download courses using your iOS or Android LinkedIn Learning app.