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Financial Analysis, Planning and Forecasting Theory and Application

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  1. Financial Analysis, Planning and ForecastingTheory and Application Chapter 22 Long-Range Financial Planning – A Linear-Programming Modeling Approach By Alice C. Lee San Francisco State University John C. Lee J.P. Morgan Chase Cheng F. Lee Rutgers University

  2. Outline • 22.1 Introduction • 22.2 Carleton’s model • 22.3 Brief discussion of data inputs • 22.4 Objective-function development • 22.5 The constraints • 22.6 Analysis of overall results • 22.7 Summary and conclusion • Appendix 22A. Carleton’s linear-programming model: General Mills as a case study • Appendix 22B. General Mills’ actual key financial data

  3. 22.2 Carleton’s model

  4. 22.2 Carleton’s model

  5. 22.2 Carleton’s model

  6. 22.2 Carleton’s model

  7. 22.2 Carleton’s model

  8. 22.2 Carleton’s model

  9. 22.3 Brief discussion of data inputs

  10. 22.3 Brief discussion of data inputs

  11. 22.3 Brief discussion of data inputs

  12. (Cont.) 22.3 Brief discussion of data inputs

  13. 22.4 Objective-function development (22.1) where

  14. 22.4 Objective-function development (22.2) (22.3) (22.3a)

  15. 22.4 Objective-function development (22.4) (22.5)

  16. 22.4 Objective-function development (22.6) (22.7) (22.7a)

  17. 22.5 The constraints • Definitional constraints • Policy constraints

  18. 22.5 The constraints Fig. 22.1 Structure of the optimizing financial planning model. (From Carleton, W. T., C. L. Dick, Jr., and D. H. Downes, "Financial policy models: Theory and Practice," Journal of Financial and Quantitative Analysis (December 1973). Reprinted by permission.)

  19. 22.5 The constraints (22.8) (22.9) Because General Mills has no preferred stock or extraordinary items, AFC= ATP:

  20. 22.5 The constraints

  21. , 22.5 The constraints ,

  22. 22.5 The constraints

  23. 22.5 The constraints .

  24. 22.5 The constraints

  25. 22.5 The constraints To get the interest payment on long-term debt

  26. 22.5 The constraints

  27. 22.5 The constraints AFC1+0.00441DL1=149.17 (22.10a) AFC2+0.00441DL2=173.45 (22.10b) AFC3+0.00441DL3=198.22 (22.10c) AFC4+0.00441DL4=226.05 (22.10d)

  28. 22.5 The constraints (22.11) where

  29. 22.5 The constraints (22.12a) (22.12b)

  30. 22.5 The constraints (22.13) where

  31. 22.5 The constraints

  32. 22.5 The constraints

  33. 22.5 The constraints

  34. 22.5 The constraints

  35. 22.5 The constraints

  36. 22.5 The constraints (22.10e) (22.10f) (22.10g) (22.10h) (22.10i)

  37. 22.5 The constraints (22.14)

  38. 22.5 The constraints .

  39. 22.5 The constraints

  40. 22.5 The constraints (22.15a) (22.15b) (22.15c) (22.15d)

  41. 22.5 The constraints (22.16) (22.17a) (22.17b)

  42. 22.5 The constraints (22.17c) (22.17d) (22.19)

  43. 22.5 The constraints (22.19a) (22.19b)

  44. 22.5 The constraints

  45. 22.5 The constraints (22.17f)

  46. 22.5 The constraints

  47. 22.5 The constraints

  48. 22.5 The constraints

  49. 22.5 The constraints (22.17o)

  50. 22.5 The constraints