From the course: Financial Modeling and Forecasting Financial Statements
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Forecasting investing cash flow
From the course: Financial Modeling and Forecasting Financial Statements
Forecasting investing cash flow
- Capital expenditures, or CapEx, are purchases of long-term operating assets, such as land, buildings and equipment. To forecast the required annual level of Home Depot's capital expenditures, we start with the sales forecast. Supporting a higher level of sales requires more land and more buildings, but how much more? Well, this depends on how efficiently Home Depot is using its land and buildings to generate sales. For example, a common efficiency measure in retail businesses is sales per square foot. The higher this number, the more efficiently the company is using its land and buildings to generate sales. For example, in 2018, Home Depot's sales per square foot was $447, meaning that during the year, each square foot of space in Home Depot's locations generated, on average, $447 of sales. This is pretty good. By comparison, Lowe's sales per square foot in 2018 was just $341. Another financial ratio that captures this same…
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