WO1996025717A1

WO1996025717A1 - Computer based financial planning system

Info

Publication number: WO1996025717A1
Application number: PCT/US1996/001057
Authority: WO
Inventors: David J. Weiss; Ronald Kalin; Philip N. Good, Jr.; Robert J. Low; Phillip P. Lohnes
Original assignee: Business Matters Incorporated
Priority date: 1995-02-14
Filing date: 1996-01-25
Publication date: 1996-08-22

Abstract

A financial planning system (10) that is implemented on a computer having a display, a user input device, a processor, and memory storage areas, and generates projected pro forma financial statements under user definable scenarios including a plurality of assumption-specific modules (14) for generating assumption outputs for respective assumptions, each assumption-specific module having a plurality of modes (24) for entering information for generating the assumption outputs, and including a user-accessible mode selector for selecting one of the modes for the assumption-specific module, and a pro forma calculation engine (18) operable to access the assumption outputs and generate pro forma financial statement outputs (12) therefrom.

Description

COMPUTER BASED FINANCIAL PLANNING SYSTEM

Background of the Invention

The invention relates to a computer-based financial planning system for generating and analyzing projected pro forma financial statements under user definable scenarios.

Financial planning models for businesses employ user-supplied assumptions about certain future business events and operations as inputs and perform calculations on these inputs to generate a set of integrated pro forma financial statements (balance sheet, income statement, cash flow statement) that describe the expected financial operations and performance of the business being

modelled. Such models are conventionally created using spreadsheet software programs in which the assumption inputs to the model are deposited in spreadsheet cells, and spreadsheet formulas are created to read those input cells and compute output cells which collectively provide a pro forma financial statement output.

The inputs to the financial planning models and the spreadsheet formulas can be changed if one wishes to evaluate the resultant effects of different assumptions on the pro forma financial statement output. The values of the pro forma financial statement outputs can be subjected to ratio and other analysis to assess the performance and condition of the business being modelled.

Summary of the Invention

In one aspect, the invention features, in general, a computer-based financial planning system that generates projected pro forma financial statements under user definable scenarios. The system includes a plurality of category-specific assumption generating modules, and a pro forma calculation engine that accesses the assumption outputs and generates pro forma financial statement outputs. Each assumption generating module relates to a respective assumption such as sales, cost of sales, expenses, accounts receivables, etc. For each module, the user selects one of a plurality of different modes for generating the respective assumption outputs. E.g., one module could be operated in a direct entry mode in which the user supplies a top level aggregate for the assumption; another module could access a detailed, assumption-specific interactive editor to generate a low-level set of assumption outputs, and yet another module could access an external source such as a spread sheet to obtain input information to generate the assumption outputs. A single scenario may thus be based on a variety of sources, allowing the user to adjust the level of detail on a assumption-by-assumption basis. Scenarios are easily created and modified, and without the need to change spreadsheet formulas.

In another aspect the invention features, in general, a financial planning system that provides an interactive user display for visualizing the effect of input financial statement values on an output return on equity value. The system generates a display that shows the input financial statement values, intermediate values based on combinations of the input values, and the output return on equity value and indicates the relationships between the intermediate values and the input financial statement values and the output return on equity value. A user input device is used to vary the input values on the display as desired (e.g., by increase and decrease buttons adjacent to the input financial statement values on the display), and the intermediate values and output return on equity value are automatically recalculated and displayed. In another aspect the invention features, in general, a financial planning system that provides an interactive user display for visualizing the effect of change of input financial values (e.g., sales volume, price, interest rate, cost of sales, payroll, operating expenses) of a user definable scenario on an output parameter (e.g., net income, income from operations, or gross margin). The display shows changes of the input financial values using, e.g., a slider for each input value and a box that shows percentage change indicated by the slider position. The input values can be varied by the user, e.g., by moving the slider, and the changed values are used with the original input information for the scenario by assumption modules and a pro forma calculation engine to generate the output parameter, which, e.g., can be shown as a graph on the display.

Other advantages and features of the invention will be apparent from the following description of the preferred embodiment thereof and from the claims. Brief Description of the Drawing

Fig. 1 is an overall block diagram of a computer-based financial planning system that generates projected pro forma financial statements according to the

invention.

Fig. 2 shows an interactive screen display used to define scenarios modelled in the Fig. 1 system.

Figs. 3-8 show interactive screen displays for selecting modes of operation and entering top level aggregate information for six different categories of assumptions in the Fig. 1 system.

Fig. 9 shows an interactive screen display used to input information from an external spread sheet. Figs. 10-21 show interactive screen displays used by detailed assumption-specific editors to input detailed information.

Fig. 22 shows an interactive screen display for analyzing return on equity and return on invested

capital.

Fig. 23 shows an interactive screen display for sensitivity analysis.

Appendices:

1. Outputs From Assumptions

2. Inputs to Assumptions

3. Pro Forma Engine Output Description

4. Pro Forma Engine Formulas

Description of the Preferred Embodiments Referring to Fig. 1, there is shown computer-based financial planning system 10 for generating projected pro forma financial statements 12 under user definable scenarios. System 10 is implemented on an IBM compatible 486 or above PC running Microsoft Windows 3.1 or above and having at least 8Mb of RAM, a video monitor, and keyboard and mouse user input devices. The computer is programmed to provide the modules, interactive displays (on the PC monitor), designated storage areas in its memory, and other features as described herein using Visual Basic software, created employing standard windows programming techniques. The underlying calculations are executed in a combination of C and C++ primarily for performance, storage and efficiency reasons.

System 10 includes seventeen assumption-specific modules 14 (only two are shown on Fig. 1) for generating assumption outputs for respective assumptions, memory storage areas 16 for storing respective assumption outputs, and pro forma calculation engine 18, which accesses the assumption outputs at memory storage areas 16 (in the RAM of the PC) and generates pro forma

financial statement 12. As indicated by arrows 19 on Fig. 1, some modules 14 access storage areas 16 for other modules 14 to use the assumption outputs of other modules 14 as inputs. Table 1 lists the seventeen modules 14 and their "upstream dependencies," which identify the

assumption outputs of other modules that are used as inputs. Table 1 also identifies six general categories in which the seventeen assumption modules 14 are grouped for ease of use.

As indicated in Fig. 1, assumption-specific modules 14 have three different modes for generating its assumption output and user-accessible mode selector 20 for selecting one of the three modes for the particular assumption-specific module 14. The first mode is provided by quick entry mechanism 22, which permits the user to directly enter a top-level aggregate for the assumption. The second mode is provided by link 24 to an external spread sheet. The third mode is provided by detailed, assumption-specific interactive editor 26, which requests detailed information from the user and generates a low-level set of data for the assumption output. The three mechanisms for entering data are described in detail below with reference to Figs. 3-21. Each assumption module includes calculation software 27 for calculating the outputs at storage areas 16 based upon the inputs according to standard accounting

principles and formulas.

The particular items making up each assumption output for modules 14 are listed in Appendix 1 in the "Output Array" column. The "When Use" column indicates if the specified items are generated under all three modes of operation (by "Both") or if the specified items are only generated by a detailed editor (by "Detail") or are only generated in a direct entry mode or as a

spreadsheet link (by "Top"). The items that begin with "k" (referred to as "K-items" herein) are used by pro forma engine 18; the other items in the assumption output array of Appendix 1 are used as inputs for other

assumption modules 14 or as itemized values used

internally at the particular module 14 under which they are listed. For each item listed in Appendix 1, there in fact are twelve values for each full year being forecast.

The input items that modules 14 receive from other modules 14 are listed in Appendix 2 in the "Input Array" column. The "When Use" column indicates if the specified inputs are used under all three modes of operation (by "Both") or if the specified inputs are only used by a detailed editor (by "Detail") or are only used in a direct entry mode or a spreadsheet link (by "Top"). Pro forma calculation engine 18 combines the outputs from assumption modules 14 that are stored at memory storage areas 16, and combines the K-item outputs according to 6AAP (Generally Accepted Accounting

Principles) rules to perform the calculations to produce pro forma statement outputs 12. Appendix 3 lists the K-item entries and definitions of the pro forma statements 12 that are output by pro forma calculation engine 18 and descriptions for the entries. The K-item entries include the K-items obtained as assumption outputs from memory storage areas 16 and other K-items calculated from the items obtained as assumption outputs.

Appendix 4 is a text file that specifies the formulas used to create pro forma statements 12 based upon the K-items of the assumption outputs or other K-items calculated from the K-items of the assumption outputs. For example, the "klminiOthCurAssetMini" entry on the second page identifies the "Miscellaneous Current Assets" line of the Balance Sheet and it is calculated by adding the three entries identified in "formula

klmegaPpdExp + klmegaOthCurAsset + klmegaArOth."

In operation, the user is presented with a hierarchy of related interactive screen displays to initially define the scenario, to access the assumptionspecific modules, and, following calculation of the pro forma statements, to analyze and report the information. The hierarchy is implemented by displaying "folders" with tabs at the highest level and "subfolders" within a folder at a lower level. Active folders and subfolders are indicated on the display by highlighting the folder tabs.

Referring to Figs. 2-8, it is seen that the highest level displays the following folders:

"Scenarios," "Assumptions," and "Analysis and Reports." In Fig. 2, the Scenarios folder, which does not have any subfolders, is active and displayed. In Figs. 3-8, the Assumption folder, which has six subfolders corresponding to the categories of assumptions listed in Table 1, is active, and a different subfolder is active and displayed on each of Figs. 3-8. Thus the Sales & Expenses subfolder is active and displayed on Fig. 3; the Payroll subfolder is active and displayed on Fig. 4; the Cash Management subfolder is active and displayed on Fig. 5; the Assets subfolder is active and displayed on Fig. 6; the

Liabilities & Equity subfolder is active and displayed on Fig. 7; the Externals subfolder is active and displayed on Fig. 8.

When creating a new scenario, the user first accesses the Scenarios folder by clicking (e.g., using the mouse user input device) on the Scenarios folder tab. This causes the display of Fig. 2 to appear on the screen. The user identifies the Scenario in box 40 and uses boxes 42, 44 below and the six buttons 46-58. Box 42 lists the names of Scenarios stored in memory. Box 44 lists comments that have been entered by the user. The New button 46 refers to creating a new scenario and is used to call up a screen for entering the name of the new scenario. The Copy button 48 is used to make a copy of the currently selected scenario, including all

assumptions. The Delete button 50 is used to delete the currently selected scenario. The Info button 52 is used to call up a screen presenting additional information such as the color used to display the scenario, the date it was created, the name of the person who created it, the date it was last modified and the name of the person who last modified it. The Profile button 54 is used to call up a screen for entering information that is

relevant to the entire business, such as the name of the business, the date on which its fiscal year ends, and the state in which it operates. The Actual button 56 is used to call up a screen to input past financial statements for use in system 10. The Balances button 58 is used to call up a screen for setting the balance sheet entries at the start of the forecast.

After defining the scenario, the user accesses the seventeen assumption modules 14 via the six category subfolders of the Assumption folder shown in Figs. 3-8.

On Fig. 3, Sales & Expenses is the active subfolder; it includes three boxes 60, 62, 64 for

entering and displaying information for the Sales, Cost of Sales and Expenses assumption modules. To navigate between assumption modules, the user clicks the mouse within the box for the assumption module. On Fig. 3, box 60 for the Sales assumption module is shown active, as is indicated by the display of three mode selector buttons 66, 68, 70 for controlling mode selector 20 to select the mode of operation of the assumption module. Buttons 66, 68, 70 are mutually exclusive "radio type" buttons; only one is active at one time; activating one button

automatically deactivates a button that had been active. On Fig. 3, button 66 for top level entry is active. The other two assumptions on this subfolder have also been set to high level entry by mode selector 20, as indicated by the display of "using high level" to the left of boxes 62, 64.

To enter information at the top level, the user simply enters the figures in the appropriate edit boxes, e.g., edit boxes 72 in Sales assumption box 60. On Fig. 3 the values for Sales in boxes 72 are set to zero and need to be filled with the numbers to be used by system 10 for the scenario. Each edit box represents a year. The edit boxes are arranged in columns for the year of the forecast as indicated by the boxes 74 at the top of all of the assumptions. Only three years are displayed at one time; buttons 76 are used to scroll through all years in the forecast.

To enter information at the detail level, the user selects detail level button 68 to call up another screen in which the user responds to requests for detailed information by detailed assumption editor 26. To link information from a spreadsheet, the user selects

spreadsheet link button 70 to call up a screen in which the user identifies a spreadsheet file and what part of the spreadsheet is to be linked into the Sales assumption module. The detailed assumption editors and link to spreadsheet mechanism are discussed in detail below in connection with Figs. 9-21.

On Fig. 3, box 62 is activated to access the assumption module for the Cost of Sales assumption. When entering information in the high level mode, the user selects entry information as dollars or percent of sales with buttons 75, 77. On Fig. 3, percent of sales button 77 is selected, and information is thus entered into edit boxes as percentage. Box 78 is used by the user to define how the composition of cost of sales is broken down between three categories, materials, labor and overhead. Box 80, called "inventory adjustment," is used to change the level of inventory from year to year. If the value is zero, the level of inventory varies with the level of sales. If the user wants to reduce inventory, he enters a negative number. If the user wants to

increase inventory beyond the level of sales, he enters a positive number.

If the user had selected the dollar entry button 75, the edit boxes would be formatted as dollars, and the user would enter dollar amounts as opposed to

percentage amounts. The remaining boxes would stay the same. Composition box 78 would still use percentage values, and inventory adjustment would still use dollar values.

On Fig. 3 box 64 is used to access the assumption module for the Expenses assumption. When entering information in the high level mode, the user once again has the choice to enter the information in the edit boxes in either dollars or percent of sales using the selector buttons indicated. Percent of sales is shown selected in Fig. 3. Box 82 is used to enter the percentage of the total expense that is allocated to the cost of sales; this is always entered as a percent and is allocated above the gross margin line on the financial statements. Box 84 is used to enter the percentage of expenses that are paid on open account (i.e.., credit); this

information is used by the A/P assumption module.

On Fig. 4, Payroll and Benefits is the active subfolder. The high level mode of entry is shown

selected. The Payroll and Benefits box 86 includes edit boxes 88 for Payroll and edit boxes 90 for Benefits.

Using the indicated buttons, the user selects to enter the information into the edit boxes as dollars or as percent of sales for payroll and as percent of payroll for benefits. Box 92 is used to enter the percentage of payroll that is allocated as a cost of sales, and is thus above the gross margin line.

On Fig. 5, the Cash Management subfolder is shown active. It includes boxes 94, 96, 98, and 100 for the Minimum Cash Balance, Accounts Receivable, Accounts

Payable and Line of Credit assumptions, respectively.

The minimum Cash Balance assumption module only operates in the high level mode; the information in this

assumption consists of a single number (for each time period) that represents the minimum amount of money that the business selects to have on hand; the value is entered in edit boxes 102. On Fig. 5 the Minimum cash balance is active; thus selector buttons 66, 68, 70 of mode selector 20 are not shown on Fig. 5 for the other three assumptions, though these buttons are in fact displayed when the other assumption modules are active in this subfolder. The information entered in the high level mode for the Accounts Receivable assumption module in edit boxes 104 represents the days outstanding for receiving payment for sales. The information entered in the high level mode for the Accounts Payable assumption module in edit boxes 106 represents the days outstanding for making payment for accounts payable. The information entered in the high level mode for the Line of Credit assumption module in edit boxes 108 represents the line of credit ceiling that the business has for each year in the forecast.

On Fig. 6 the Assets subfolder is shown active. It includes boxes 110, 112, 114 for the "Investments," "Property, Plant and Equipment" and "Other Assets" assumption modules, respectively. Buttons 66, 68, 70 of mode selector 20 are shown for the active assumption, Investments. In the high level mode shown selected for the Investments assumption module, the user enters the net change in investments for each year in the forecast in edit boxes 116. In the high level mode of entry for the Property, Plant and Equipment assumption module, there are three lines of edit boxes 118, 120, 122 for entering the purchases made in each year, the accumulated depreciation that occurs in each year, and the percent of depreciation allocated to cost of sales (again above the gross margin line) , respectively. In the high level mode of entry for the Other Assets assumption module, the user enters the net change in other assets for each year of forecast in edit boxes 124.

On Fig. 7 the Liabilities & Equity subfolder is shown active. It includes boxes 126, 128, 130 for the Debt, Other Liabilities and Equity assumption modules, respectively. Buttons 66, 68, 70 of mode selector 20 are shown for the active assumption. Debt. In the high level mode shown selected for the Debt assumption module, there are two lines of edit boxes 132, 134 for entering

information as to debt incurred and debt retired in the respective years. In the high level mode of entry for the Other Liabilities assumption module, the user enters the net change in other liabilities for each year of the forecast in edit boxes 136. In the high level mode of entry for the Equity assumption module, the user enters the net change in the equity level for each year of forecast in edit boxes 138.

On Fig. 8, the Externals subfolder is shown active. It includes boxes 140, 142, 144 for the Economic Factors, Taxes, and Covenants and Goals assumption modules. In the high level mode of entry for the

Economic Factors assumption module, the user enters the borrowing interest rate and the investment interest rate for each year of the forecast in edit boxes 146, 148. In the high level mode of entry for the Taxes assumption module, the user enters the effective federal tax rate and the effective state tax rate in edit boxes 150, 152. At the high level mode of entry, the Covenants and Goals assumption module simply allows the user to turn the monitoring of covenants and goals on and off with buttons 154, 156 in box 144.

When the user chooses the link-to-spreadsheet mode of entry by activating button 70 of mode selector 20 on the subfolders previously discussed, system 10 calls up a dialog box that allows the user to select a spreadsheet from which the active assumption module will obtain input information. After the file has been chosen, the user is presented with the screen which is shown in Fig. 9, which shows obtaining information for the PPE assumption module. The display screen includes box 158 for

displaying a portion of the selected spreadsheet, box 160 to indicate periodicity of the cells in the spread sheet to which the user is linking, time line bar graph 162 to indicate the cells that must be selected to satisfy the periodicity selected, box 164 to indicate type of range, and box 166 to display coordinates for selected cells of the spreadsheet.

As is illustrated in box 158, spreadsheets are represented in terms of rows and columns. Columns typically have a letter heading, and rows have a numeric heading. Box 158 displays columns A-E and rows 43-53. A specific cell is identified by the intersection of its row and column, and a user can select a range of cells to satisfy the requirements for input information. For example, the user may choose cells B49 through D49 to represent three years or three months worth of data, depending upon the periodicity for the cells, i.e., years or months. The periodicity can be months, years or quarters or any subtotals that might exist in the range of cells and is selected with buttons 168. Button 170 is used to select linking to either a specific range of cells called an absolute range, or to a named range, as displayed in box 164. If an absolute range is selected, the coordinates of the range can be entered in box 166. The user can also simply point to cells displayed in box 158 to select cells. After the cells have been selected, the values in the cells are linked into the assumption module from which the user navigated to the spreadsheet link.

Referring to Figs. 10-13, there are shown the screen displays that appear when using detailed

assumption editor 26 for the Sales assumption. The user enters the Sales & Expenses subfolder (Fig. 3) , activates the Sales assumption, and activates detail level button 68, to call up this detailed assumption editor 26.

Editor 26 first calls up the dialog box that is shown in Fig. 10, which asks the user to select to forecast sales by product only or to divide the forecast in up to three different "dimensions" using buttons in Fig. 10.

Examples of dimensions include product, territory, sales person, channel, and division.

After the user has made the Fig. 10 selection, editor 26 calls up the List Manager screen shown in Fig. 11 to define the elements contained in each dimension. On Fig. 11 the product dimension is active, as indicated in box 172. The user enters the names of the products in box 174, and they are added to the list in box 176.

Category box 178 is used to allow the user to subclassify the entries. E.g., the dimension "products" can be subclassified into services, actual products, or

maintenance. Buttons 180 are used to create, delete, or replace an item in the list. E.g., the user types the name of a new product into box 174 and activates Create button 180 to add the new product to the list in box 176. Buttons 182 and 184 are used by the user to select which items in the list in box 176 are to be used in a given scenario (button 182) and which are to be omitted in a given scenario (button 184). E.g., the user may not wish to do a forecast for all the products in a product line. After the user enters a product into box 174 and hits the Create button 180, by default, the product is used in the scenario.

The user performs similar operations to define any other dimensions in the Fig. 11 screen, identifying the new dimension in box 172. After the user has filled out the elements for all dimensions, editor 26 presents the user with the screen shown in Fig. 12. This is the main Sales assumption screen in which the user enters the actual forecast in grid 186. The sales information can be monthly or quarterly information and can include quarterly or annual subtotals. The sales information is listed in a hierarchy that has Total Revenues at the top, then totals for breakdowns such as "products" and

"services," and then the names for the products. Fig. 12 shows only one product (called "product") in box 188, which indicates that sales are entered in dollars (as opposed to units) . One option for filling out the sales forecast in box 186 is for the user to simply enter the values for each product for each time period in the respective cell.

Another option is to activate the Forecast Methods button 190, which allows the user to choose one of several built-in forecasting methods, such as a linear growth, or seasonal growth. The user then enters the beginning number and the growth rate, and editor 26 computes the values for each of the months according to the selected method and populates the cells in grid 186.

Audit button 192 is used to display the formulas that were created when the user used one of the forecast methods. This allows him to see exactly how the figures in each cell are generated.

Clear All button 194 allows the user to start over. It clears all the values in grid 186 and goes back to Fig. 10 and allows him to redefine the entire sales forecast. Buttons 196, 198 are used to access and define or redefine price lists or discount lists for the

products.

Fig. 13 shows a seasonality curve that can be used in several of the pop-up forecasting methods accessed by button 190. For example, with a seasonal growth forecast method, the user enters an ending value and uses the seasonality curve 200 shown on Fig. 13 to spread that value back over the year. The user simply enters

weighting factors in boxes 202 for each month of the year. Editor 26 computes the percentage of total sales that this represents for each month based upon the aggregate of the weighting factors. The information is shown in boxes 204 and is graphically displayed in the bar graph called seasonality curve 200. For example, if the user enters a weight of 50 in January and a weight of 50 in December, boxes 204 would display 50% in January and 50% in December. The graph in curve 200 would have a large bar in January at 0.5 and a similar bar in

December, but nothing between. The seasonality curve can be named, saved (for used in other scenarios or

assumptions), and replaced using box 206 and buttons 208, 212. It can be deleted with button 210.

Referring to Fig. 14, there is shown the screen display that appears when using detailed assumption editor 26 for the Cost of Sales assumption. The user enters the Sales & Expenses subfolder (Fig. 3), activates the Cost of Sales assumption, and activates detail level button 68, to call up this detailed assumption editor 26. The user first selects the inventory evaluation method, LIFO (last in first out) , FIFO (first in first out) or average cost, using buttons 214, 216 or 218,

respectively. These methods evaluate inventory according to standard accounting principles. The user enters the year that he is forecasting into box 220 (1995 is shown in Fig. 14), and enters the cost information for each product in Standard Costs table 222. In the first column of table 222, editor 26 lists the products that have already been defined for the scenario using the List Manager shown in Fig. 11. Fig. 14 merely shows "product" as the name of the product in the list. For each product in the first column, the user enters in the second column whether the product was built or bought; in the

subsequent columns, the use enters standard cost

information for the product, namely, the materials cost. the direct labor cost and the overhead cost. The column "Expressed as" refers to whether the values entered in the Materials, Direct Labor, and Overhead columns are dollar values or are expressed as percentages of sales. button 224 is used to copy the values to future years.

Fig. 15 shows the screen display for detailed assumption editor 26 for the Expenses assumption. The Operating Expenses component of expenses is shown on Fig. 15; other components include Non-operating Expenses and Headquarters Expenses. Again, this is selected by the user with detail button 68 in the Sales & Expenses subfolder (Fig. 3). This screen display is similar in many respects to that used for the Sales assumption, as shown in Fig. 12. Box 226 contains a grid in which expense information is entered for the items listed in the first column; the items of expense are defined using a List Manager similar to that shown in Fig. 11. As with Sales, the user can access built-in standard forecast methods (e.g., based on cost of living or seasonal growth) with button 228 to forecast the expenses. Audit button 230 is used to display in each cell the formula that is created from the forecast method as opposed to the actual dollar value. Buttons 232 permit the user to select to display the months or quarters and quarterly or annual totals. Row button 234 is used to include or exclude expenses from various departments. Buttons 236, 238, 240 at the bottom of the screen allow the user to switch between grids to define operating expenses, non-operating expenses and headquarters expenses. Button 242 is used to do headquarters allocations. Headquarters allocations allows the user to define an aggregate amount for operating expenses (rather than by department) and to specify how the aggregate amount is allocated to each department. For example, the user may specify rent expense for the entire company, but then allocate it to departments based on the square footage used by each department.

Fig. 16 shows the screen display for the detailed assumption editor 26 for the Accounts Receivable

assumption. The user accesses this editor by using detail level button 68 for the Accounts Receivable assumption on the Cash Management subfolder (Fig. 5). Buttons 244, 246 are used to select a method for accounts receivable, either a day sales outstanding method or the typical collection pattern method. Based upon that selection, the contents of box 252 below forecast year box 248 and copy button 250 would be different. On Fig. 16, box 252 shows the contents of box 252 when the user selects the typical collection pattern method using button 246; in box 252 the user is asked to enter

percentages for collections in the indicated time

periods. If the user selects day of sales outstanding (not shown on Fig. 16), the user is asked, for each year, to enter the number of days and whether those days are based on total sales or on credit. In box 254 the user is asked to break down the sales into open account

(credit), cash and credit card, and optionally the user can select whether he offers prompt payment discounts or whether there are any credit card fees to be included in the accounts receivable calculation.

Fig. 17 shows the detailed assumption editor 26 for the Accounts Payable assumption, which is accessed like the other editors 26 with the appropriate button 68. As in Fig. 16, the user is asked to select a method for calculating accounts payable, either a days payable outstanding method or a typical payment pattern method, using buttons 256, 258. Based upon the selection, the contents of box 260 below buttons 262, 264 would be different. Fig. 17 shows using the days payable

outstanding method. The user simply chooses the year in which he is forecasting with button 262 and enters the days payable in terms of days. If the user had selected the typical payment pattern method, the contents of box 260 would be similar to the contents of box 252 shown in Fig. 16. In the Inventory and PPE box 266, the user uses buttons 268, 270 to select whether to include these items in general expenses or to specify their days payable outstanding separately (in boxes 272, 274). The user can also specify inventory discounts in boxes 276, 278.

Fig. 18 shows the screen display for the detailed assumption editor for the Line of Credit assumption, accessed by the appropriate button 68. Boxes 280, 282 are used to specify when the line of credit starts and ends. Box 284 is used to specify the cap on the line of credit, and boxes 286, 288, 290 are used to specify the relevant interest rate on the line of credit. Box 292 is used to provide information about the availability of the line of credit, e.g., whether it is tied to accounts receivable, inventory, or PPE. Box 294 is used to provide information on any exclusions from the

collateral. For example. Fig. 18 shows excluding

accounts receivable over 90 days. Other boxes are used to exclude other assets as appropriate.

Fig. 19 shows the screen display for the detailed assumption editor 26 for the Investment assumption. It includes investments table 296 which lists the

investments that the user has forecasted. Box 298 can be used to select a sorting method for the list for the display in table 296. For example, it can be sorted by months, as shown in Fig. 19, indicating investment income for the months. It could also be sorted by creation date. Investments can be added or removed with buttons 298, 300. Currently, the list is empty. The user would hit the add investment button 298, and editor 26 would call up the display screen shown in Fig. 20. The user enters the name in box 302, the amount of principal in box 304, the dates of the investment in boxes 306, 308. Buttons 310, 312 are used to identify whether the

investment bears interest or dividends. If button 310 is selected, boxes 314, 316, 318 appear, and the user enters the interest rate, the frequency of payment, and the first month of interest. If button 312 is selected, boxes 320, 322, 324 appear (Fig. 21), and the user enters the amount of periodic dividend payment, the frequency of payment, and the first month of dividend.

Display screens similar to Figs. 19-21 are also used by the detailed assumption editors 26 for other assumptions, namely PPE, Other Assets, Debt, Equity, and Liabilities. The basic user navigation is as exactly as described for the Investment assumption, but the

information entered into the boxes varies according to the assumption itself.

The detailed assumption editors for the Taxes and Economic Factors assumptions include tables in which the users enters a forecast for a given item, e.g., an interest rate, for respective time periods. The columns represent the time periods. The rows represent the specific items.

The Covenants and Goals assumption module is not used to create values used in generating pro forma financial statements but instead is used to establish conditions to be checked when calculating the statements. The user defines a covenant using a formula language or a covenant builder language. For example, the user may specify that net income can never drop below a certain amount as a covenant. After the pro forma calculation engine runs and calculates the financial statements, it checks all of the covenants to see if any of them have been violated. If a covenant has been violated, the system informs the user. The user can return to assumption modules 14 to change input information, and the values at storage areas 16 are automatically updated and carried through to other modules as indicated in Table 1 and Appendix 2. After the user has completed entering information for a

scenario using assumption modules 14, pro forma engine 18 prepares pro forma statements 12 based upon the outputs at storage areas 16. The user can view the statements on the computer's display monitor or can print them out.

The user can save the assumption information for the scenario, can modify it by returning to specific

assumption modules 14, and can create new scenarios starting with the information already entered, using new button 46 and copy button 48 in the Scenarios folder shown on Fig. 2.

The user can also access analysis modules 326, 330, 332, 334, 336, 338, shown on Fig. 1, that are included in system 10 to analyze the generated pro forma statements by ROE/ROIC analysis, trends and variance analysis, ratio analysis, sensitivity analysis, valuation analysis, and break even analysis, using criteria that are well known accounting and finance practices. These modules are accessed via buttons displayed on the

Statements and Analyses folder (not shown).

For example, if the user accesses ROE/ROIC module 326, he is presented with the interactive screen display shown on Fig. 22. The screen represents a so-called Dupont tree; this is a hierarchical tree with inputs represented by the white boxes with buttons next to them. Values from the pro forma financial statements are used in the boxes on the right side; intermediate calculations are performed with values displayed as indicated, and the final output, return on equity, is shown in the left-hand box. Fig. 22 does not show any values in the boxes; the boxes are filled with values from pro forma statements 12 as calculated by system 10 for the scenario, and the user can then see what the return equity is in the scenario. Buttons 340 are used to vary the input values up or down. The user can click on one of the buttons 340 for the input boxes, either up or down, and see how sensitive the return on equity value is to certain inputs. For

example, the user could increase revenue by 3 or 4% and see how that would affect return on equity. Module 338 automatically recalculates and displays all of the intermediate values and the new return on equity would be displayed. While the numbers in the white boxes come directly from the financial statements for a scenario, varying one of these numbers only varies that single variable on Fig. 22 and does not affect the other

numbers. (I.e., the assumption modules are not accessed to change other values in the pro forma statements.) This display permits the user to visualize easily the effects that changes in input information have on return on equity and the intermediate ratios.

If the user accesses sensitivity analysis module 334, he is presented with the interactive screen display shown in Fig. 23. Module 334 permits the user to vary inputs with sliders and see how it affects certain output parameters, which are graphed. The user creates a name in box 342 for the chart that will be produced, and selects output parameters to be graphed from box 344; e.g., the user could select as an output: net income, EBIT

(earnings before interest and taxes) , or income from operations or gross margin. Below box 344, are boxes and sliders for eight inputs: sales (either volume or

growth), price, interest rate, cost of sales, payroll, operating expenses, days sales outstanding (DSO) , days payable outstanding (DPO) . By manipulating the slider up and down, the user is shown a plus or minus percentage movement of the slider in the associated box. The boxes all originally have 0% values in them, indicating no change in the values that are taken from the scenario and used to create a graph. When a slider is moved to change an input value, the input value of the scenario is changed accordingly. The changed values are used as inputs for assumption modules 14; the outputs 16 of the assumptions modules are recalculated; the pro forma engine 18 is rerun, the financial statements 12 are regenerated and the result in output value is then charted so that the use would see the effect of, e.g., a 10% increase in sales on the net income.

Definitions:

As used herein, the following terms have the stated meanings.

"Assumption" means a grouping of related financial data; such assumptions include sales, cost of sales, expenses, payroll and benefits, minimum cash balance, accounts receivable, accounts payable, line of credit, investments, PPE, other assets, debt, equity, other liabilities, economic factors, and taxes.

"Assumption output" means the set of outputs that define conditions based upon relevant inputs for that assumption.

"Pro forma financial statement output" means a balance sheet, an income statement and a cash flow statement for a given set of assumption outputs.

What is claimed is:

Claims

1. A financial planning system that is

implemented on a computer having a display, a user input device, a processor, and memory storage areas, and generates projected pro forma financial statements under user definable scenarios comprising

a plurality of assumption-specific modules for generating assumption outputs for respective assumptions, each said assumption-specific module having a plurality of modes for entering information for generating said assumption outputs, and including a user-accessible mode selector for selecting one of said modes for said

assumption-specific module, and

a pro forma calculation engine operable to access said assumption outputs and generate pro forma financial statement outputs therefrom.

2. The system of claim 1 further comprising respective storage areas for storing said assumption outputs,

and wherein some of said assumption-specific modules are configured to access storage areas for other assumption-specific modules to obtain inputs for

generating assumption outputs of said some of said assumption-specific modules.

3. The system of claim 1 wherein said means for providing a plurality of modes includes means for

receiving user entered data, means for communicating with an external source of data, and a detailed, assumption-specific interactive editor.

4. The system of claim 3 wherein said detailed, assumption-specific interactive editor includes means to present requests to a user and to receive responses to the requests from a user.

5. The system of claim 3 wherein said detailed, assumption-specific interactive editor includes means to provide graphical displays.

6. The system of claim 3 wherein the detailed interactive editor includes tools to forecast values over a period of time.

7. The system of claim 6 wherein said tools include different forecast methods.

8. The system of claim 1 further comprising means to store the assumption outputs of a given scenario, and

means to employ the assumption outputs stored for said given scenario when generating an assumption output in a new scenario.

9. The system of claim 3 wherein the detailed interactive editor generates a list manager display for use in generating lists of items for one or more

assumptions.

10. The system of claim 3 wherein said system includes means to provide displays that group together all assumptions within a single folder and related assumptions under common subfolders.

11. The system of claim 3 wherein said assumption modules cause said computer display to indicate that an assumption module is active, and said user accessible mode selector includes mode selector buttons displayed on said computer display for an active assumption.

12. The system of claim 3 where said external sources of data include a spread sheet, and wherein said assumption modules cause said computer display to display spread sheet coordinates.

13. The system of claim 3 where said external sources of data include a spread sheet, and wherein said assumption modules cause said computer display to display a time line indicating periods for information obtained from said spread sheet.

14. A financial planning system that is

a plurality of assumption-specific modules for generating assumption outputs for respective assumptions, each said assumption-specific module including a

detailed, assumption-specific interactive editor that is different than interactive editors for other assumption modules, and

15. A financial planning system that is

a plurality of assumption-specific modules for generating assumption outputs for respective assumptions, means to store the assumption outputs of a given scenario, means to employ the assumption outputs stored for said given scenario when generating an assumption output in a new scenario, and

16. A method of generating projected pro forma financial statements under user definable scenarios using a computer having a display, a user input device, a processor, and memory storage areas, said method

comprising

accessing a plurality of assumption-specific modules for generating assumption outputs for respective assumptions using said user input device and said

display,

selecting, for each module accessed, one mode of a plurality of modes for entering information for

generating said assumption outputs in response to

selections provided on said display using said user input device,

entering information in response to requests on said display provided by said modules, and

accessing said assumption outputs with a pro forma calculation engine and generating pro forma financial statement outputs therefrom.

17. A financial planning system that is

implemented on a computer having a display, a user input device, a processor, and memory storage areas, and provides an interactive user display for visualizing the effect of input financial statement values on an output return on equity value comprising

means for generating a display that shows said input financial statement values, intermediate values based on combinations of said input values, and said output return on investment value and indicates the relationships between said intermediate values and said input financial statement values and said output return on investment value,

means for varying said input values on said display using said user input device, and

means for calculating said intermediate values and said output return on investment value based upon said input values displayed, and for displaying calculated values for said intermediate values and said output return on investment value.

18. The system of claim 17 wherein said means for varying includes increase and decrease buttons adjacent to said input financial statement values on said display.

19. A financial planning system that is

implemented on a computer having a display, a user input device, a processor, and memory storage areas, and provides an interactive user display for visualizing the effect of change of input financial values of a user definable scenario on an output parameter comprising

means for generating a display that shows changes of said input financial values and said output parameter, means for varying said changes of said input financial values on said display using said user input device, and

means for calculating said output parameter comprising

a plurality of assumption-specific modules for generating assumption outputs for respective

assumptions based upon said input financial values and upon said changes of said input values indicated on said display, and