Thomas R. Piper
Harvard Business School (289040-PDF-ENG)
February 02, 1989
The CEO of a US electronics company assesses the financial projections and financing plan of the CFO. Given the cyclical nature of the industry and the volatility of corporate performance, the CEO is unsure of the usefulness of predictions based on a linear extrapolation of rapid sales growth and stable earnings and assets-to-sales ratios. Teaching objectives include: 1) How many years into the future should the forecasts run in view of uncertainty, 2) how to deal with the high level of uncertainty in preparing forecasts or designing a financing plan, and 3) how to underestimate your financing requirements under adverse conditions.
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