Join Jim Stice for an in-depth discussion in this video Cash flow forecasts, part of Finance Foundations: Business Valuation.
- A DCF, or discounted cash flow analysis,…requires that we have a number for the…interest rates so that we can do the discounting,…and also that we have forecasts for the cash flows.…We can use the structure of accounting to…create a disciplined forecast of the future…cash flows for a business.…This brief discussion is merely an…introduction to the fascinating topic of…creating pro-forma, or projected financial statements.…But this will give you an understanding of…the fundamental concepts.…A pro-forma, or projected financial statement,…can be used to get an overall picture of…a company's future financing needs,…its potential problem areas, and so forth.…
Three important questions to ask in…preparing a pro-forma financial statement are as follows:…What's the starting point of…any financial statement forecast?…Second, what causes increases in the…company's assets and liabilities?…And number three, what causes increases in…the company's expenses?…So first, the sales forecast, which is the starting point.…The starting point, and in many ways,…
Make sure to check out the Stice brothers' other accounting and finance courses to understand the other economic factors that impact your business.
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