A STUDY ON FINANCIAL PLANNING AND FORECASTING OF KINEMATIC

TRADING AND CO
INTRODUCTION
Financial Planning and Forecasting is the estimation of value of a variable or set of
variables at some future point. A Forecasting exercise is usually carried out in order to
provide an aid to decision making and planning in the future. Business Forecasting is an
estimate or prediction of future developments in business such as Sales, Expenditures and
profits. Given the wide swings in economic activity and the drastic effects these fluctuations
can have on profit margins, business forecasting has emerged as one of the most important
aspects of corporate planning. Forecasting has become an invaluable tool for business to
anticipate economic trends and prepare themselves either to benefit from or to counteract
them. Good business forecasts can help business owners and managers adapt to a changing
economy. Financial planning and forecasting represents a blueprint of what a firm proposes
to-do in the future. So, naturally planning over such horizon tends to be fairly in aggregative
terms. While there are considerable variations in the scope, degree of formality and level of
sophistication in financial planning across firms, we need to focus on common elements
which include Economic assumptions, Sales forecast, Pro forma statements, Asset
requirements and the mode of financing the investments. In general usage, financial plan
Can be a budget, a plan for spending and saving future income. This plan allocates future
income to various types of expenses, such as rent or utilities, and also reserves some income
for short-term and long-term savings. A financial plan can also be an investment plan, which
allocates savings to various assets or projects expected to produce future income, such as a
new business or product line, shares in an existing business, or real estate.
FINANCIAL FORECAST
Financial plan can also refer to an annual projection of income and expenses for a company,
division or department. A financial plan can also be an estimation of cash needs and a
decision on how to raise the cash, such as through borrowing or issuing additional shares in a

company. While a financial plan refers to estimating future income, expenses and assets.
FINANCING PLAN
Finance plan usually refers to the means by which cash will be acquired to cover future
expenses, for instance through earning, borrowing or using saved cash. Corporations use
forecasting to do financial planning, which includes an assessment of their future financial
needs. Forecasting is also used by outsiders to value companies and their securities. This is
the aggregative perspective of the whole firm, rather than looking at individual projects.
Growth is a key theme behind financial forecasting, so growth should not be the underlying
goal of corporation creating shareholder value is enabled through corporate growth.
1. The benefits of financial planning for the organization are
2. Identifies advance actions to be taken in various areas.
3. Seeks to develop number of options in various areas that can be exercised under
different conditions.
4. Facilitates a systematic exploration of interaction between investment and financing
decisions.
5. Clarifies the links between present and future decisions.
6. Forecasts what is likely to happen in future and hence helps in avoiding surprises.
7. Ensures that the strategic plan of the firm is financially viable.
Provides benchmarks against which future performance may bemeasured.There are three
commonly used methods for preparing the pro forma financial statements.
They are:
1. Percent of Sales Method
2. Budgeted Expense Method.
3. Variation Method
4. Combination Method.
PERCENT OF SALES METHOD
The percent of sales method for preparing pro forma financial statement are fairly simple.
Basically this method assumes that the future relationship between various elements of costs
to sales will be similar to their historical relationship. When using this method, a decision has
to be taken about which historical cost ratios to be used.
BUDGETED EXPENSE METHOD
The percent of sales method, though simple, is too rigid and mechanistic. For deriving the pro
forma financial statements, we assume that all elements of costs and expenses bore a strictly
proportional relationship to sales. The budgeted expense method, on the other hand calls for
estimating the value of each item on the basis of expected developments in the future period

for which the pro forma financial statements are prepared. This method requires greater effort
on the part of management because it calls for defining likely developments.
VARIATION METHOD
Variation method on the other hand, calls for estimating the items on the basis of percentage
increase or decrease of comparing with the same item of base year. It is quite flexible
throughout the future period. This method is not like budgeted method the value estimating
for an item under this method is entirely dependent on the historical data.
COMBINATION METHOD
It appears that a combination of above explained three methods works best. For certain items,
which have a fairly stable relationship with sales, the percent of sales method is quite
adequate. For other items, where future is likely to be very different from the past, the
budgeted expense method or variation method is eminently suitable. A combination method
of this kind is neither overly simplistic as the percent of sales method nor unduly onerous as
the budgeted expense method or variation method.
ASSUMPTIONS
The method used for this study is combination method which eminently works best for an
organization. The assumptions made for forecasting are as follows:
1. The sales are expected to increase by 20% every year.
2. All expenses are estimated under percentage of sales method.
3. Tax is estimated on the basis of profit.
4. Proposed Dividend to be increased by Rs. 5,000,000 every year
5. Dividend tax is payable on the basis of proposed dividend.
6. Secured and unsecured loans to be decreased by 5% every year.
7. Tax liability on percentage of sales method.
8. Fixed assets are expected to increase by 2% every year
9. Work-in-progress of capital is expected to decrease by 10% every year.
10. Investments are expected to increase by 5%.
11. Current assets like inventories and sundry debtors are expected to increase by 2% every
year.
12. Cash and it equivalents on the basis of percentage of sales method.
13. Loans and advances are estimated to increase by 5% every year.
14. Current liabilities are expected to increase by 5% every year
15. Provisions are expected to increase by 10% every year.
SCOPE OF THE STUDY

 The data and information gathered were during the project training
The scope is limited the secondary data only
The scope is de limited in the years of 2010-2015
AREA OF THE STUDY
All the activities carried out in the KINEMATIC TRADING AND CO
OBJECTIVE OF THE STUDY
The objective of the project is to help the management of the organization in decision
making, regarding to the subject manner
Calculation of financial statement an duration is only the clerical task where as the
interpretation of its the needs immense skill, intelligence for slightness.
One of the easiest and most popular ways of evaluating performance of the
organization is to compare its present ratios with the past ones called comparison and
through development action plan
Its give an indication of the direction of change and reflects whether the organization
financial position and performance has improved deteriorate or remained constant
over period of time
Here much emphasis is given of the historical comparison and on for casting the
immediate future trends
LIMITATION OF THE STUDY
It is only based on the mathematical interpretation of he figure and ignores the factors
such as a management style, motivation of worker, leadership etc.
It is affected d by the price level changes
It is does not given any clue for future.
CHAPTERIZATION SCHEMfE

Chapter I deal with the introduction, company profile, and industry profile
Chapter II deals with the review of literature
Chapter III deals with the research methodology
Chapter IV deals with the data analysis and interpretation
Chapter V deals with the finding, suggestion, and conclusion