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Financial Planning and Control Systems

Financial Planning and Control Systems

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Published by: yashanu24 on Jan 09, 2012
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04/17/2012

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FINANCIAL PLANNING AND CONTROL SYSTEMS

January 8, 2012

The output from financial planning takes the form of budgets. and other estimates in support of the Financial Plan. Detail Budgets include sales forecasts. The most widely used form of budgets is Pro Forma or detailed Budgeted Financial Statements.What is Financial Planning Financial planning is a continuous process of directing and allocating financial resources to meet strategic goals and objectives. Collectively. production forecasts. . all of these budgets are referred to as the Master Budget.

we will consider financial planning as one single process that encompasses both operations and financing. we can have an Operating Plan and a Financial Plan. . Financial planners are interested in how to finance the operations. However.Types of Financial Planning Financial planning is divided into planning for operations and planning for financing. Therefore. Operating people focus on sales and production.

Financial Goal This is the first step to start the financial planning process. The top management should realize and recognize the importance of setting the organizational mission. . which should be clearly defined and communicated. goal and objectives.

4. Evaluate results by using financial statements. 3. . 6. 2. Develop budgets to monitor and control progress toward goals. Implement financial plans and strategies. Develop financial plans and strategies to achieve goals. Revise goals as situations change. 5.Steps in the Financial Planning Process: 1. Define financial goals.

Revise plans .1. Define financial goals 2. Evaluate results 6. Develop plans 3. Implement plans 4. Develop budgets FINANCIAL ACTIONS ‡Basic asset decisions ‡Credit decisions ‡Investment decisions Prepare financial statements 5.

FINANCIAL PLANNING Process .

Long-term goals³to be accomplished in time periods greater than 5 years. .Putting target dates on financial goals: Short-term goals³to be accomplished within the next year. Intermediate-term goals³to be accomplished in the next 2-5 years.

Example for Master Budget 1) 2) 3) 4) ABC limited is manufacturing Shirts of ´Aµ Brand and their sales is totally domestic The Current production is at 80% of capacity and at this level their ROI is 42% Industry ROI is ranging between 55% to 60% Do some sensitivity analysis and prepare the master budget for the company so that they can achieve the ROI of at least 52% or more .

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