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Balance forecast – see the company's financial position ahead

Revise EPM's balance forecast helps to see how equity, solvency ratio, working capital, liquidity, financing needs, and key financial ratios will develop in the future – and how this development can affect the company's ability to maintain normal business operations.



Book a Revise EPM presentation

 

5 Questions of Management

1

SOLVENCY

Can the company's financial structure withstand future developments?

Equity, solvency ratio, and indebtedness.

2

WORKING CAPITAL

How much money is tied up in the business?

Accounts receivable, inventory, and accounts payable.

3

LIQUIDITY

Are the funds sufficient for upcoming obligations?

Cash reserves, upcoming payments, and available financing.

4

FINANCING & COVENANTS

Are the funds sufficient for upcoming obligations?

Cash reserves, upcoming payments, and available financing.

5

SUPPLY SECURITY

Are the working capital and financing sufficient to maintain the business?

Purchases, inventory, suppliers, and the ability to meet customer promises.




Working capital affects whether the company can serve its customers.

If too much money is committed to inventory, liquidity may weaken. Conversely, if inventory is

reduced too much or the company does not have enough financing for purchases, it may result in a decline in delivery capability.

Therefore, the company must find a balance:

as little committed capital as possible while still having sufficient ability to meet customer demand.

Financial forecasting also helps secure delivery capability.

A company's ability to deliver to customers does not depend solely on production or inventory management.

It also depends on whether the company can:

Finance the necessary purchases
Maintain sufficient inventory
Pay suppliers on time
Finance production
Handle demand growth
Prepare for changes in demand and delivery times.

Finance, working capital, and operational activities are therefore directly related.

Covenant risk is not just a financing agreement issue.


It can affect:

Availability of financing
↓
Liquidity
↓
Financing of purchases and investments
↓
Business operational capability

This makes covenants a matter of business management, not just a financial manager's

monitored key figure.

The balance sheet forecast ultimately indicates the company's ability to continue planned operations

Solvency, liquidity, working capital, and financing are not separate key figures. 

They together determine how well the company can: 

pay its obligations 
finance its growth
make investments
acquire the necessary products and materials
maintain its delivery capability
cope with unexpected changes 

↓

 FINANCIAL CAPABILITY


SALES FORECAST

What will we be selling?
➔

Profit forecast

How is profitability developing?
➔

Balance sheet forecast

How is the financial position developing?
➔

Cash flow forecast

Are the funds sufficient?
➔

Business
operational capability

Solvency • Liquidity • Financing • Delivery capability