Financial Forecasting Essay - Essay Example

The financial decision of the company will have an impact on the performance of the sales company. The company is planning to continue paying dividends by 50% of its net profit, raise finance through borrowing short-term finances and half by borrowing long-term loans. The company also intends to put surplus revenue into the cash. The decisions will affect negatively the sales growth in term of the liquidity, risk and profitability.

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Financial forecasting modeling

At first using short-term borrowing, for instance, bank overdraft, the profitability of the company will be affected. Short-term finances have high-interest rates; therefore, the cost of finance will be high thus reducing the profitability of the company. As a result, the sales growth of the company will reduce because it will be difficult for the company to plough back the profits. Short-term borrowing also affects the liquidity of the company.

The company policy to continue paying 50% of net profit as the dividend will also affect the revenue growth of the company. In this case, it will be difficult for the company to plough back profits to the business. As a result, it will be difficult for the business to invest; therefore, the revenue growth of the company will decrease.

Forecasting financial statements

The company decision to put any surplus revenue into cash will also affect the sales growth of the company. For a company to experience sales growth, it has to separate the cash flow and the revenue. As a matter of fact, the turning of cash into revenue will affect the growth of the company.

To sum it up, the company financial decisions will have negative impacts on the sales growth of the company. The short-term borrowing will influence the sales growth of the company negatively because they will affect liquidity and profitability of the company. The continuation to pay dividends of 50% of the total profits will affect the profitability of the company.