Agriculture Reference
In-Depth Information
Table 11.4
Pro forma balance sheet
PRO FORMA BALANCE SHEET
As of —
Figures Based On:
Assets
Current assets:
Cash
Desired cash balance
Accounts receivable
Average collection period
Inventory
Monthly inventory turnover for the season
Total current assets
Fixed assets Present fi gure adjusted for period's depreciation and any
planned investments
Total assets
Liabilities
Current liabilities:
Notes payable
Amount of borrowed funds needed to balance assets
with equities
Accounts payable
Expectation of number of days' purchases on the topics
Accrued liabilities
Same as preceding period
Total current liabilities
Long-term debt
Expected and additional borrowings
Total liabilities
Owner's Equity
Paid-in capital
Retained earnings
Present amount plus period earnings to be retained
Total owner's equity
Total liabilities and owner's equity
become involved. Doug might well involve his family, the bookkeeper for the lumberyard,
salespeople from both fi rms, supplier representatives, and his lender, to name a few. Past
experience and future price trends are key ingredients, along with expected competition
from other fi rms in the area, and general economic conditions.
It is vital that these two tools be based on solid goals in the areas of cash balances, inven-
tory turnover, accounts receivable collection periods, revenues, and expenses. These goals
help the manager in the budgeting and forecasting process. Specifi c goals also imply there is
a management plan that can be objectively evaluated at the end of the period.
With documented goals, management can use the interim cash fl ow statement and fi nan-
cial statements to check their progress against their estimates and assumptions. If actual and
planned performances vary widely at any point, the reason can be explored and the weak-
nesses corrected. As a professional manager, Doug Davies will avail himself of all these
fi nancial tools as he progresses in his new venture, prepared and as ready as anyone can be
for the future.
External sources of fi nancing
There are a multitude of sources of capital available to any agribusiness. Some of these sources
are used only in specifi c situations, while others are used more routinely. The most important
sources of fi nancing for an agribusiness will be discussed in the following sections.
