Financial Planning Tools and Concepts

ABM_ BF12-IIIc-d-10, ABM_ BF12-IIIc-d-11 3

English – Grade 12
Alternative Delivery Mode
Quarter 1 – Module 3: Financial Planning Tools and Concepts
First Edition, 2020

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Business Finance
Quarter 1 – Module 3:
Financial Planning Tools and
Concept
Introductory Message
For the facilitator:

Welcome to the Business Finance – Grade 12 Alternative Delivery Mode (ADM) Module
on Financial Planning Tools and Concept.

This module was designed, developed, and revised by educators to support you, the teacher,
or facilitator in aiding the learners meet the standards set by the K to 12 Curriculum while
disabling their personal, social, and economic limitations in schooling.

This module hopes to engross the learners into guided and independent learning activities at
their limited space and time. Additionally, this also targets in helping students gain the needed
21st-century skills while taking into attention to their needs and situations.

Learning Objectives:

1. Identify the steps in the financial planning process

2. Illustrate the formula and format for the preparation of budgets and projected
financial statements.
3. Explain tools in managing cash, receivables, and inventories.
Inside the learning resource in the main text, you will also see this box in the body of the
module:

Notes to the Teacher

This serves as a useful tips or strategies
that will help you in facilitating the learning
process.

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For the learner:
Welcome to the Grade 12 Business Finance Alternative Delivery Mode (ADM) Module
Financial Planning Tools and Concept!

The learner demonstrates an understanding of the definition of finance, the activities

of the financial manager, and financial institutions and markets Hence, the hand in this
learning resource signifies that you as a learner is capable and empowered to
successfully achieve the relevant competencies and skills at your own pace and time.
Your academic success lies in your own hands!
This module was designed to give you enjoyable and important chances to guide you
in your learning at your own pace and time. You will be qualified to process the
contents of the module while being an active student.
This module has the following parts:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the
module.
What I Know
This part includes an activity that aims to
check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.
What’s In This is a brief drill or review to help you link
the current lesson with the previous one.
What’s New In this portion, the new lesson will be
introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity, or a situation.
What is It
This section provides a brief discussion of the
lesson. This aims to help you discover and
understand new concepts and skills.
What’s More This comprises activities for independent
practice to solidify your understanding and
skills of the topic. You may check the answers
to the exercises using the Answer Key at the
end of the module.
What I Have Learned This includes questions or blank
sentences/paragraphs to be filled in to
process what you learned from the lesson.

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 What I Can Do This section provides an activity that will help
you transfer your new knowledge or skill in
real-life situations or concerns.
Assessment This is a task which aims to evaluate your
level of mastery in achieving the learning
competency.
Additional Activities In this portion, another activity will be given to
you to enrich your knowledge or skill of the
lesson learned. This also tends to the
retention of learned concepts.
Answer Key This contains answers to all activities in the
module.

At the end of this module you will also find:

References This is a list of all sources used in developing

this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not hesitate
to consult your teacher or facilitator. Always bear in mind that you are not alone.
We hope that through this material, you will experience meaningful learning and
gain a deep understanding of the relevant competencies. You can do it

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 What I Need to Know

This module was designed and written with you in mind. It is here to help you master
the definition of finance and the concept of finance. The scope of this module permits
it to be used in many different learning situations. The language used recognizes the
diverse vocabulary level of students. The lessons are arranged to follow the standard
sequence of the course. But the order in which you read them can be changed to
correspond with the textbook you are now using.

The module is divided into lessons, namely:

• Lesson 1 – Concept and Steps in the Financial Planning Process
• Lesson 2- Budgeting

After going through this module, you are expected to:

1. identify the financial planning process
2. prepare budgets.
3. compute for sales budget and production budget

What I Know
Let’s find out how much do you know about the coverage of this module.

Write TRUE if the statement is correct, write FALSE if the statement is incorrect
before each number.

__________1. Financial planning applies only to the area of Business Finance

__________2. The First step in preparing Financial Finance is to determine the

expected cost and expenses

__________3. The production budget is prepared ahead of the sales budget.

__________4. A budget is a planning device and not a control mechanism.

__________5. Short term financing means that the term of the financing is one
year or less.

__________ 6. The budget committee is composed of personnel or employees

from the finance officer.
__________ 7. Sales projections based on previous sales are considered final
in making the financial plan.

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____________8. The vision of the business defines its short-term financial
direction.
____________9. Financial Goals are broader than financial objectives.
___________10. The mission statement outlines the current financial activities
that the business undertakes.
___________11. The production schedule prepared ahead of the sales
forecast.
___________12. The dividend’s payout ratio refers to the ratio of income of the
business to the amounts of the dividends.
___________13. The additional funds needed must be determined once sales
are expected to remain at a steady level.
___________14. To analyze and interpret projected financial statements, the
business may use the financial mix ratio
___________15. The financial plan must be reviewed by a higher level of
management before implementation.

Lesson
Concept and Steps in the Financial
1 Planning Process

How do we see yourselves five years from now? If you know the answer to this
question you probably have a well concrete plan to achieve it. That is why in this
particular lesson, we will discuss the concept of financial planning whether achieving
a short term or long term or short-term goals. It is important to note that there are
several steps in financial planning in committing with your targets.
In the various aspect of finance, one of the most important aspects is the
concept of financial planning. Financial planning is both applied in Public Finance and
Business finance whether a business is a profit organization or a non-profit
organization. Financial planning, however, does not exist and operate as an
independent activity in the business organization. It is happening in the entire team or
departments like marketing, finance, and all levels of management.
Planning can be defined as an important aspect of the firm’s operations
because it provides the roadmaps for guiding, coordinating, and controlling the firms’
actions to achieve its objectives. In achieving long term goals, we need to have
milestones. Milestones are short term goals. Long term goals can achieve in five years
while short term goals can achieve in less than a year. Planning is anchored by the
mission, vision of the business organization.

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 What’s In
To introduce the new lesson let us have an activity:
On a sheet of paper, answer the following questions:
A. Create an essay about how they see themselves five years from now?
B. Differentiate their long term and short-term goals,
C. Identify the things that they can do in a year, in two years, three years, or four
years.

Notes to the Teacher

Begin by presenting a scenario in everyday life

(Try: the life of a high school student). Ask the learners
how they see themselves five year from now. They can
create an essay about their goals in life. What are their
plans to achieve it? Then, let them identify their long-
term goals and short-term goals.

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 What’s New
Additional Funds needed in the business

The formula to compute for additional funds when sales are expected to grow as
follows:

Additional funds needed = projected increase in assets liabilities -

spontaneous increase in current – increase in retained earnings

Projected increase in assets= Change in sales - Current assets/sales

Spontaneous increase in current liabilities= change in sales- current

liabilities / Sales

Increased in retained earnings = Earn after tax – Dividend payment

What is It

TERM MEANING
Financial Planning is the task of determining how the organization will
afford to achieve its strategic goals. Usually, an
organization creates a financial plan immediately after
the vision and objectives have been determined. The
financial plan describes each of the activities,
resources, equipment, and materials that are needed to
achieve an organization's objectives as well as the
timeframe.

Financial plan A financial plan is a document containing a person's

current money situation and long-term monetary goals,
as well as strategies to achieve those goals. A financial
plan may be created independently or with the help of a

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 certified financial planner. It should be congruent with
the business mission goals, objectives
FINANCIAL 1. Set goals or objectives
PLANNING PROCESS 2. Identify resources
3. Identify goal-related tasks
4. Establish responsibility centers for accountability
and timeline
5. Establish the evaluation system for monitoring and
controlling.
6.Determine the contingency plan
BUDGETING The process or act of preparing a financial budget.

TYPES OF 1. Fixed Budget

BUDGETING 2.Flexible Budget
3. Continuous or Rolling Budget
4. Cash Budget
5.Sales Budget
6. production Budget
7. Operating Budget
8. Financial Budget
9. Capital Budget
10. Master Budget

PROCEDURES IN 1. Prepare the sales budget

BUDGETING 2. Prepare the production budget
3. Prepare the projected operating expenses and
financing charges.
4. Prepare the financial budget and capital budget
5. Prepare the [projected statement of comprehensive
income and projected balance sheet.

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 What’s More

This time you will test your skills in using technical terms in factors
that should be considered in forecasting sales

Directions: Identify the following factors are EXTERNAL or INTERNAL

_______1. Production capacity ________9. Management style

_______ 2. GDP
_______ 3. Political Crisis
_______4. Economic Crisis
_______5. Competition
_______6, Man power requirements
_______7. Political Crisis
_______8. Regulatory Environment
________10. Reputation of Stockholders
________11. Interest Rate
________12. Inflation
________13. Foreign Exchange Rate
________ 14. Financial Resources
________ 15. Development in the Industry

What I Have Learned

You can easily define Definition and Concept of Budgets now let us
have some problem and Functional Budgets Problems and Solutions
Sales Budget
Problem 1: The following data are related to Philippine Compta Ltd. You are
required to prepare a sales budget.
Estimated Sales:
Product Thailand Philippines Price for Rice For the
Thailand per Philippines
unit per unit
Desktop 400 200 P 15,000 P 13,000
Laptop 90 130 P 35,000 P 32,000
Computer 20 70 P 8,0000 P 7,000
Table

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Solution:
Product Thailand Philippines Total
units price amount Units price amounts Units Amount
Desktop 400 15,000 6,000,000 200 13,000 2,600,000 600 8,600,000
Laptop 90 35,000 3,150,000 130 32,000 4,160,000 220 7,310,000
Computer 20 8,000 160,000 70 7,000 490,000 90 650,0001
Table
Total 510 --- 9,310,000 400 -- 7,250,000 910 16,560,000

Problem 2: Production Budget

The Western Philippines Hotel’s sales forecast for the next quarter, ending
December 31st, indicates the following:

Product Expected Sales

Crabs 2,000 Units
Prawns 3,500
Wasabi 5,200

Inventories at the beginning and desired quantities at the end of the quarter
are as follows:

Product October 1st December

31th

Crabs 580 units 250

Units
Prawns 160 150
wasabi 130 180

Requirement: A Production Budget in units for next quarter?

Solution
Description Crabs Prawns Wasabi
Budgeted Sales 2,000 3,500 5,200
Expected Ending 250 150 180
Inventory
Total Units 2,250 3,650 5,380
Requirents
Beginning (580) (160) (130)
Inventory
Production 1,670 3,490 5,250
Budget in units

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 What I Can Do

A. PROBLEM: Mark Manufacturing Company sold 28, 530 units of product TM in

2019 which was higher by 10% compared to the units sold in 2028. The product was
sold at P 400 per unit. Because of marketing strategies, companies expect to
increase sales by 20% in 2019. The company wants to sell the product at P 500 per
unit.
DIRECTION: Prepare the sales budget in 2019. Answer on a separate sheet of
paper

B.: The following data are related to Adelaida’s Merchandise International. You are
required to prepare a sales budget.
Estimated Sales:
Product Thailand Singapore Philippines Price for Price for Rice For
Thailand Singapore the
per unit Per unit Philippines
per unit
Luxury 500 700 600 P 16,000 P 20,000 P 12,000
bag
Bracelet 50 300 200 P 34,400 P 38,000 P 29,500
(Gold )
Earing 45 90 50 P 9,740 P 10,000 P 7,890
(Gold)

C. Problem: Production Budget

The Philippine Cow center sales’ forecast for the next quarter, ending
December 31st, indicates the following:

Direction: A Production Budget in units for next quarter. Write your answer
on a separate sheet of Paper

Product Expected Sales

Fresh milk 1,500 Units
Pastillas de Leche 2,500
Chocolate Yoghurt 6,200
Strawberry Yoghurt 4,800

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Inventories at the beginning and desired quantities at the end of the quarter
are as follows:

Product October 1st December

31th
Fresh milk 350 Units 450 units
Pastillas de Leche 250 200
Chocolate Yoghurt 430 450
Strawberry Yoghurt 430 340

Assessment

TRUE OR FALSE Write TRUE if the statement is correct otherwise write FALSE. Use
another sheet of paper
_______ 1. Since there is a finance office in almost all business organization, a budget
committee is no longer necessary during budget preparation
_______ 2. Budgeting is the process of preparing the strategic plan of the business
organization
_______ 3. A budget is not a plan but a purely quantitative or monetary expression of the
business target.
_______ 4. The participation of the employees in the budget preparation may boost their
morale resulting in improved productivity and efficiency.
_______ 5. Through the budget, the resources of the business are appropriated properly
based on prioritized programs and projects.
________ 6. The budget provides a common direction to the different units of the organization.
________ 7. The budget is also considered a control mechanism of the financial activities of
the business.
________ 8. The preparation of the budgets coordinates the activities of the different
functional units of a business.
________ 9. A budget that covers five years is generally considered a medium term-budget
________10. The Production budget reflects the cost of producing a product
________11. The master budget shows the operating budget and financial budget.
________12. The financial budget reflects the capital and cash budget of the business.
________13. The production budget is prepared ahead of the sales budget.

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________14. A fixed budget is a budget that shows only the fixed cost of production and
marketing operation
________15. A budget prepared based on various levels of production capacity is called a
fixed budget.

Additional Activities

A. Reyes Trading Inc. presents the actual sales of the first three months of
the year 2019 on its three products as follows:
Product VB PRODUCT KZ TOTA|L
January P230,000 P 390,000 P 620,000
February P 264,000 P 410,000 P 674,000
March P 287,200 P 425,000 P 712,200
The business expects that the trends for the past three months will continue in April
and May 2019
REQUIRED: Determine the projected sales for April and May 2019 for the two
products. Rounds the amount to thousand
B. ABC Manufacturing Company is expected to have a 15% increase in sales in
2020 against the 2019 sales of P500,000. The company projects 10% margins at the
end of 2020. Forty percent of the net profit margin will be returned to the
stakeholders in the forms of dividends.
REQUIRED: Compute the amount to be added to the retained earnings.

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What I Know Assessment What’s More
1. FALSE 1. FALSE
2. TRUE 2. TRUE Answer may vary
3. FALSE 3. FALSE
4. TRUE 4. FALSE
5. TRUE 5. TRUE
What I Can Do
6. TRUE 6. TRUE A. Answer may vary
7. TRUE 7. FALKSE
B. Answer may vary
8. TRUE 8. FALSE
C. Answer may var
9. TRUE 9. TRUE
10.TRUE 10.FALSE
11.TRUE 11.FALSE Additional
12.FALSE 12.TRUE
13.FALSE 13.FALSE Activities
14.FLASE 14.TRUE
A. Answer may vary
15.FALSE 15.TRUE
B. Answer may vary
Answer Key
References

Nick Alduana, Business finance in the Philippine Settings for Senior High School,

Patricia S. Cayanan, Teaching Guide for Senior High School BUSINESS FINANCE
Published by the Commission on Higher Education, 2016


Investopedia https://www.investopedia.com/terms/f/financial_plan.asp

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For inquiries or feedback, please write or call:

Department of Education – Division of San Jose City

San Jose City National High School –Senior high school

Josephine College, Brgy. Calaocan,San Jose City, Nueva Ecija

Telefax:

Email Address: deomel.caballero@deped.gov.ph