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Module 5: Session 5 1
Module 2: Session 5
BUSINESS PLAN: LONG TERM PROJECTIONS
Module 5: Session 5 2
1) To make long term performance projections
2) To make long term cash flow projections
3) To differentiate between long term profits and cash using profit and cash flow projections
4) Review long term profitability and cash flow and make appropriate adjustments
Session Objectives
Module 5: Session 5 3
Make assumptions on growth in works, revenues and costs
Identify long term investment needs Make assumptions on capital development needs
and preliminary capital structure. Economic assumptions on price and costs Assumption on the long term horizon such as on
drawings, asset replacement, taxation. Identify capital needs and work backward to
restructure capital.
Procedure for 5 year forecasting
Module 5: Session 5 4
Generate the income and the cash flow out of the forecasted data and analyze it.
Identify emerging patterns Work out revenue trends Work out cost trends Work out profit and loss in long term Work out cash flow Derive balance sheets
Analysis
Module 5: Session 5 5
Year Yr 1 Yr 2 Yr 3 YR 4 YR 5 TotalRevenues Revenues from other sources TotalExpenditure:
Materials Administration and overheads LabourMachinery and equipmentStart up costsDepreciationInterest on loans
TotalProfit/loss
Long term profit projection format
Module 5: Session 5 6
Year Yr 2 Yr 2 Yr 3 YR 4 YR 5 TotalAccounts receivablesReceipts from other sources Capital from owners or term loansTotalPAYMENTS:
Materials suppliersAdministration and overheads LabourEquipment suppliersDrawings or dividendsTaxes paid
TotalNET CHANGE IN CASHBalance from previous periodBalance carried to next period
Long term cash flow projection format
Module 5: Session 5 7
1) Using assumptions in case study develop a performance forecast for five years
2) Make five year cash flow projections3) Note any emerging trends in profit and cash
flow4) Propose strategies that may be undertaken
by Munaku to improve both profitability and cash flow Relate the strategies to your company.
Activity
Module 5: Session 5 8
THE END
Q & A
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