Financial Forecast on PZ Cussons

Undergraduate
Essay
Finance & Accounting
Pages 5 (1255 words)
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Forecasting is a very important tool for the company to find the extent to which company can grow in the future. This helps the company to arrange for the resources required for that growth. If the firm was previously inefficient, then by becoming it more efficient it may be able to grow without extra costs incurred. …

Introduction

The AFN can be raised by a number of the methods. There is no fixed criteria. In our example we had considered the interest to remain same in spite of the growth in turnover by 5%. While deciding on the debts we must consider the current ratio, gear ratio, debt to equity ratio and times interest earned. If the equity market is strong enough raising equity can be the best option. Raising the debt will increase the interest which in turn will reduce the retained profit. This in turn can further raise the need of more AFN in the future. If the present rate of interest is higher the company may think of raising the equity instead of taking the high interest rate debt. Also the credit rating of the firm in the market is important, if it has good rating then it may be able to get the loans at lower interest rates. The option of the equity is mainly considered when the gear ratio is higher. In this case raising equity not solves the problem of AFN but it can make the gear ratio also look healthy. However, the condition of the equity markets play a very important role. If the share prices are higher than the company can get the lot of money from the shares. On the other hand if the market is not strong then it is better to put off the equity till the market improves.Thus there are various ways by which the funds can be raised to increase the sales of the company by 5%. These methods are fixed; they depend a lot on the present condition of the company and the market.
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