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Fundamentals of Financial Management, Third Edition by Vyuptakesh Sharan

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22.2 COMPLETE FORECAST OF FINANCIAL POSITION

After the forecasts of individual variables is made, they are combined to develop a complete forecast of the firm’s financial position over time. To this end, a couple of approaches are used. While one is known as the cash-flow approach, the other is the balance-sheet approach.

22.2.1 Cash-flow Approach

A cash-flow forecast is developed on the basis of the estimates of various cash receipts and payments. Cash receipts include cash sales along with the collection of bills receivable and other incomes, such as, issue of shares and debentures, maturity of investments and sale of any of the assets. Payments include the cost of goods paid in cash, interest and amortisation payments, dividend payments and ...

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