Learn how to construct a forecasted balance sheet to get a picture of a company’s future financing needs.
- Let's continue with the Rocky Company example…I introduced in the forecast and expense video.…In that video, together we constructed…a forecasted income statement.…Now we will add a forecasted balance sheet.…A pro forma, or projected, or forecasted balance sheet…can be used to get an overall picture…of a company's future financing needs…and to determine whether the company's proposed…financing plan is consistent with its operating plan.…Here is is Rocky Company's actual balance sheet…for year one, its first year in business.…
Note that as with all balance sheets,…in this case, total assets of $500 is equal…to total liabilities and equity.…In other words, the total amount paid to buy the assets…of $500 is equal to the total sources of financing…to buy those assets.…This is true by definition.…The numerical discipline of the balance sheet…insures that a company must explicitly acknowledge…and record the details of how it has obtained the money…to pay for the purchases of its assets.…Here are the forecasts, estimates, and preliminary decisions…
- Summarize the two forecasting techniques used to create a complete business plan.
- Analyze the five methods for maintaining financial records for a company and explain what kind of company would require each method.
- Calculate payroll expenses with accuracy.
- Apply the entity concept to hypothetical situations.
- Describe the process for obtaining financing from third-party sources.
- Explain the process for valuing a company.