T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

A STUDY ON FINANCIAL PLANNING AND FORECASTING TOWARDSS

CO-OPERATIVE MILK PRODUCER UNION LTD, AT SALEM

*Ms.S.Karthika **Mr.M.Mohan

*Assistant Professor ** II - MBA Student

Department of Management and Research

AVS College of Arts & Science, Salem

ABSTRACT

Financial Planning and Forecasting is the estimation of value of variable or set of

variables at some prospect point. A Forecasting work out is usually carried out in order to
provide an aid to decision-making and planning in the future.To study and analyze the existing
financial planning. To study finance and forecasting in aavin co-operative union limited.
Working capital of the Aavin. Was growing and showing positive working capital per year. The
Production capacity has been increased in the FY 2018-2019 by way of taking Loan. The Sales
turn over need to be increased proportionally to keep the financial position of the company in a
healthier manner. The study was undertaken on the financial planning and forecasting of the
company. Tool such as ratio analysis, schedule of changes in working capital, trend analysis
have been used to find out the company’s efficiency in performing all its functions.

Keywords: Forecasting, Planning, Working Capital, Financial Position, Ratio Analysis

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INTRODUCTION:

Financial Planning and Forecasting is the guesstimate of value of flexible or set of

variables at some future point. A Forecasting exercise is usually agreed out in order to supply an
aid to decision-making and planning in the future. Forecasting has emerged as one of the most
important aspects of corporate planning, forecasting has emerged as one of the most important
aspects of corporate planning. Forecasting has become anvery useful tool for trade to be hopeful
ofprofitable trends and prepare themselves either to benefit form or to counter them.

Good financial planning and forecasting characterizes a plan of what a firm proposes to
do in the future. Do, naturally planning over such horizon tends to be fairly in aggregative terms.
While there are significant variations in the aptitude, degree of carry out and level sophistication
in financial planning across firms, we need to focus on common elements which include
economic assumptions, sale forecast, Pro format statements, Asset requirements and the mode of
financing the investments.

In universal usage, a 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 treasury some income for short-term and long-term savings. A financial plan can as well
be an advantage 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 accessible business, or real
domain.

Financial forecast or financial plan can also refer to anyearlyprotrusion of income ad

expenses for accompany, division or department. A financial plan can also be an estimation of
cash desires and a conclusion on how to raise the cash, such as through borrowing or issuing
additional shares in accompany. The experience that I gathered over the period of my research as
certainly provided the management knowledge which I trust will help me in future.

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Meaning of financial planning:

Financial planning is that all business unit whether it is an industrial company, a trading
distress or a production company needs funds for moving on its actions successfully. It requires
funds to acquire fixed assets like machines, equipment’s, furniture’s etc. and to acquire raw
equipment or completewares, to pay its creditors, to meet its day-to-day fixed cost, and so on. In
fact, accessibility of passable finance is one of the most central factors for victory in any
business. However, the prerequisite of finance, now-a-days, is so large that no being is in a
position to provide the whole quantity from his individual sources. So the entrepreneur has to
depend on other sources and use a mixture of ways to raise the indispensable amount of funds. In
the precedingcoachingyou learnt about the sources and methods of raising funds. You know that
the progression of raising funds require sizeable amount of time and cost. This has its own costs.
Hence, every businessman has to be very watchful not only in assessing the firm’s prerequisite of
finance but also in deciding on the forms in which funds are raised and utilised. In this lesson,
you will learn about the process of estimating the firm’s economicconstraint and deciding on the
example of finance.

The Financial Planning Process:

 Assess your financial situation.

 Create a budget.
 Set your financial goals
 .Know your risk tolerance.
 Work out and execute a basic financial chart.
 Regularly review and adjust your financial plan.

Process of financial planning:

 Preparation of sales conjecture.

 Decide the number of fund-fixed and working capital.
 Conclude the expected benefits and profile its to decide the number of funds that can
be provided through internal sources.
 This causes us to evaluate the condition from outer sources.

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T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

 Identify the conceivable sources and set up the money expensesdiplomacy

consolidating these variables.

Importance of financial planning:

Financial Planning is the practice of confining company’s targets, policies, techniques,

projects and budget plans with respect to the financial behavior lasting for a longer duration. This
promises viable and satisfactory financial investment policies. The importance is as follows.

 Guarantees sufficient funds.

 Planning helps in guarantee a harmony between gregarious and incoming of assets
with the goal that stability is kept up.
 Guarantees providers of funds to efficiently put resources into organizations which
provokes.
 Financial Planning supports development and expansion programs which support in
the long-run sustenance of the association.
 Diminishes vulnerabilities with respect to varying business sector patterns which can
be confronted effortlessly from beginning to end enough funds.
 Financial Planning helps in moving back the vulnerabilities which can be a
restriction to the enlargement of the organization. This aids in guaranteeing safety
measures and profit of the organization.

Importance of Forecasting:
Merits, consequence or importance of forecasting involves subsequent points:-
 Forecasting provides relevant and reliable in sequence about the past and at hand
events and the likely future events. This is necessary for sound planning.
 It gives confidence to the managers for making imperative decisions.
 It is the basis for production planning premises.

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T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

 It keeps managers active and alert to face the challenges of future events and the
changes in the background.
Limitations of Forecasting:
 The collection and analysis of data about the past, existing and future involves a lot
of time and money. Therefore, administrators have to balance the cost of
forecasting with its benefits. Many small firms don't do projecting because of the
high cost.
 Forecasting can only estimate the future events. It cannot agreement that these
events will take place in the future. Longstanding forecasts will be less accurate as
compared to short-term forecast.
 Forecasting is based on certain assumptions. If these resolutions are wrong, the
forecasting will be wrong. Forecasting is based on past events. Still, history may not
repeat themself at all times.
 Forecasting entails proper judgment and skills on the part of managers. Forecasts
may go wrong due to bad decision and helps on the part of some of the executives.
Therefore, forecasts are subject to anthropoid error.

REVIEWS OF LITREACTURE:

Titman and Wessels (2017) introduced a factor analysis technique for estimating the
impact of unobservable attributes on the choice of corporate debt ratio using the data from the
469 UK firms for the period of nine years from 197-82. The study found that debt levels are
negatively related to uniqueness of a firm’s line of business. The results also indicate that
transaction costs may be an important determinant of financial forecasting choice and short term
debt ratios were shown to be negatively related to firm size. Non-debt tax shield, volatility
collateral value and future growth have not any significant impact on debt ratio.

E.Thomson (2018) there is general agreement in many forecasting contexts that

combining individual predictions leads to better final forecasts. Conversely, the relative error
decrease in a combined forecast depends upon the extent to which the component forecasts
contain unique/independent evidence. Tactlessly, obtaining sovereign predictions is difficult in
many situations, as these forecasts may be based on similar statistical models and or overlying

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information. The current study addresses this problem by incorporating a measure of coherence
into an analytic evaluation framework so that the degree of independence between sets of
forecasts can be identified easily. The outline also decomposes the performance and coherence
measures in other to explain the underlying aspects that are responsible for error reduction. The
framework is confirmed using UK retail prices index inflation forecasts for the period 1998-
2014, and inferences for forecast users are discussed.

Taub (2018) tried to ascertain the factors influencing a firm’s choice of a debt equity
ratio. For this study a total of 89 firms form Unites States were chosen randomly over a period of
ten year from 1960 to 1969 and the likelihood-ratio statistics and t-test were used test the
hypothesis described therein. The realistic results of the study in terms of the expected sign of
co-efficient were varied the return to the firm, long term rate of interest size of the firm revealed
appositive influence on the firm’s debt equity ratio as per the expectation. The effect of tax rate
on debt equity ratio was negative which is contrary to both the Traditional view and the
Modigliani-Miller tactic. The period of affluence had negative relation with leverage although
not weighty. The tax rate had adverse and significant relation with debt equity ratio.

RESEARCH METHODOLOGY

Meaning of research methodology

Research organization is a way to systematically solve the research problems. Rendering

in Clifford woody” research compresses defining and redefining problems, formulating
hypothesis or suggested solutions. Amassing, establishing and evaluating data, making deduction
and at last carefully testing conclusion to control whether they fit the framing hypothesis.

Meaning of research design

The daunting problem that follows the task of defining the research problem is the
grounding of design of the research project, popularly known as the research design, decision
regarding what, where, how much, by what means regarding an inquiry of a research study
establish a research design. a research design is the procedure of conditions for collection and
analysis of data relevance to the research determination with economy in procedure.

Sources of data

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T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

Data we collected based on two sources.

• Primary data.

• Secondary data

Secondary data:

The subordinate data are those which have already been collected by some other agency and
which have already been handled. the sources of secondary data are yearly reports, browsing
internet, through fortnightlies.

• It includes data gathered from the annual report.

• Articles are collected form official website.

Methodology used:

Type of financial statements adopted

Following two types of financial statements are commonly used in analyzing the
firm’s financial position

• Balance sheet.

• Income statements

RATION ANALYSIS:

Current ratio:

Current assets means, which can be transformed into cash within a year Current liabilities
mean those requirements maturing within a year. Ideal value of current ratio is 2:1. It means
everyone rupees of current assess less than rs.2; it shows inefficiency to manage current assets

S.No YEAR RATIO

1 2015 2.48 times
2 2016 1.60 times
3 2017 1.90 times

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T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

4 2018 1.82 times

5 2019 1.75 times
Source: secondary data

Interpretation

From the above table find that, current ratio is maximum 2.48 times in year of
2015, in the year 2017 current ratio is 1.90 times, in the year 2018 current ratio is 1.82 times, in
the year, 2019 current ratio is 1.75 times and minimum current ratio in 1.60 in year of 2016.

2020
2019
2018
2017
2016
2015
2014
2013
2.48 times 1.60 times 1.90 times 1.82 times 1.75 times

Liquid ratio

It is really essential for a firm to meet its obligations as they become due. Liquidity ratios
degree the ability of the firm to meet its current obligations. In fact, scrutiny of liquidity needs
the grounding of cash budgets and cash and fund flow speeches; but liquidity ratio, by beginning
a connection between cash and other existing assets to current compulsions, provide a quick
measure of liquidity. A firm should ensure that it does not agonize from lack of liquidity, and
also that it is not too ample highly liquid.

S.No YEAR RATIO

1 2015 1.86times
2 2016 1.18times
3 2017 1.46 times
4 2018 1.82 times

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T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

5 2019 1.75 times

Source: secondary data

Interpretations
From the above table find that, liquid ratio is maximum 1.86 times in year of 2015, in the
year 2018 liquid ratio 1.82 times, in the year 2019 liquid ratio is 1.75 times, in the year, 2017
liquid ratio is 1.46 times and minimum liquid ratio in 1.18 in year of 2016.

2020

2018

2016

2014

2012
1.86times 1.82times 1.75times 1.46times 1.18times

Proprietary ratio:

The proprietary Ratio, which is also known, is the equity ratio, shows the relationship
between shareholders, funds and total asset is financed by shareholders funds. It is an indicator
of solvency.Proprietary ratio shows the general soundness of the company. The ratio displays the
long term or future affluence of the business.

S.No YEAR RATIO

1 2015 0.12times
2 2016 0.11times
3 2017 0.10times
4 2018 0.08times
5 2019 1.75 times
Source: secondary data
Interpretation

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T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

From the above table find that, proprietary is maximum 1.75 times in year of
2019, in the year 2015 proprietary is 0.12 times, in the year 2016 proprietary is 0.11 times, in the
year, 2017 proprietary is 0.10 times and minimum proprietary in 0.08 in year of 2018.

2020
2019
2018
2017
2016
2015
2014
2013
1.75 times 0.12times 0.11times 0.10times 0.08times

Fixed asset ratio

A fixed advantage can also be defined as an asset not directly sold to a firm's
patrons/end-users. As an example, a sweltering firm's current assets would be its inventory (in
this case, flour, yeast, etc.), the value of sales payable to the firm via credit (i.e. borrowers or
accounts receivable), cash held in the bank, etc. Its non-current properties would be the oven
used to bake bread, motor vehicles used to transport deliveries, cash catalogs used to handle cash
payments, etc. While these non-current assets have price, they are not directly sold to patrons and
cannot be easily converted to cash.

S.No YEAR RATIO

1 2015 1.55times
2 2016 1.96times
3 2017 2.09times
4 2018 3.77times
5 2019 3.79times
Source: secondary data

Interpretation:

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T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

From the above table find that, fixed assets is maximum 3.79 times in year of 2019, in
the year 2018 fixed assets is 3.77 times, in the year 2017 fixed assets is 2.09 times, in the year,
2016 fixed assets is 1.96 times and minimum fixed assets in 1.55 in year of 2015.

2020
2018
2016
2014
2012
3.79times 3.77times 2.09times 1.96times 1.55times

FINDINGS:
 From the above table find that, working capital is maximum Rs.891298 in year of 2019,
in the year 2015 working capital isRs.791298, in the year 2017 working capital is
Rs.782906, in the year, 2018 working capital is Rs.782700 and minimum working capital
in Rs.555493 in year of 2016.
 From the above table find that, current ratio is maximum 2.48 times in year of 2015, in
the year 2017 current ratio is 1.90 times, in the year 2018 current ratio is 1.82 times, in
the year, 2019 current ratio is 1.75 times and minimum current ratio in 1.60 in year of
2016.
 From the above table find that, liquid ratio is maximum 1.86 times in year of 2015, in the
year 2018 liquid ratio 1.82 times, in the year 2019 liquid ratio is 1.75 times, in the year,
2017 liquid ratio is 1.46 times and minimum liquid ratio in 1.18 in year of 2016.
 From the above table find that, proprietary is maximum 1.75 times in year of 2019, in the
year 2015 proprietary is 0.12 times, in the year 2016 proprietary is 0.11 times, in the year,
2017 proprietary is 0.10 times and minimum proprietary in 0.08 in year of 2018.

SUGGESTIONS

 The organization has very low value of current ratio it should be increase in third coming

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T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

 The company has portion of Loan component which has created increased risk of
payment commitments. If Sale are not making in the expected lines, the company will be
in deep trouble.
 The Production capacity has been increased in the FY 2018-2019 by way of taking Loan.
The Sales turn over need to be increased proportionally to keep the financial position of
the company in a healthier manner.

CONCLUSION

The study was undertaken on the financial planning and forecasting of the company.
Tool such as ratio analysis, schedule of changes in working capital, trend analysis have been
used to find out the company’s efficiency in performing all its functions. To evaluate the
effectiveness of the financial planning being practical at the head office, manufacturing units,
and at the sales branches, to develop more products like milk, butter, gee, etc., Systematic
and promising financial planning procedure to enable the management to predict the future
requirement is good for the company, proper financial planning and through efficient
utilization of resources, the company can aspire for better prospect for the future growth as
well as bring about the economic development as a whole. If the company following proper
planning and forecasting to improving more profit for future year.

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T he International journal of analytical and experimental modal analysis ISS N N O :0886-9367

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