Chap 15-Financial Planning and Forecasting
centered moving average
a moving average created to put a specific observation exactly in the center of the period over which the moving average is calculated
average approach
assuming that future sales will be equal to the average historical value across some relevant period
Naive Approach
assuming that future sales will be equal to the latest period's sales
MAPE
mean absolute percentage error, a measurement of a forecast's accuracy
Additional Funds Needed (AFN)
necessary increase in assets - spontaneous increase in liabilities - projected increase in retained earnings
capital intensity ratio
relevant assets divided by current sales
spontaneous liabilities ratio
relevant liabilities divided by current sales
infinitely divisible
the ability to divide a given amount into as small a portion as needed
Additional Funds Needed (AFN)
the amount of external financing a firm must seek in order to change the asset base as necessary to support a different level of sales
first order effects
the immediately observable effects of changing one item on another. Usually contrasted with higher order effects, which are the subsequent, less observable effects of the change
trade credit
the practice of one firm selling to another on credit terms
Strategic Planning
the process of determining where a firm is going over the next year or more, how it is going to get there, and how it will know if it gets there or not
Financial Planning
the process of mapping out the future cash inflows and outflows of the firm
base case projections
the projected financial statements associated with the base case
base case
the set of assumptions underlying the firm's financial plan
Deseasonalize
to remove the effects of seasonality from historical data
