As discussed in more detail in Salmi (1980) and (1982) the long-run
financing policy of the firm is characterized by a long-run
funds-flow statement as well as growth and profitability. It is
readily shown that in steady state growth all the components of the
funds-flow statement grow at rate g in the model. (The same goes for
depreciation.) Consequently, all the components of the statement can
be divided by (funds from operations
in empirical application). The financing policy of the firm is thus
described by the following constant ratios.
The funds-flow statement is based on the following yearly income statement and change in balance sheet