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Financial Management
MODULE MATERIALS
List of Modules
No. MODULE
MODULE TITLE
CODE
1 Introduction to Financial Management FMAN 223-1
2 Framework of Financial Management FMAN 223-2
Effects of the Economic Environment on Business

3 FMAN 223-3
Strategy
4 Evaluating, Operating, and Financial Performance FMAN 223-4
5 Financial Forecasting, Planning and Control FMAN 223-5
6 Working Capital Management FMAN 223-6
Bachelor of Science
Bulacan Date Developed:
January 2021
in Accounting Polytechni Date Revised: Page 1 of 10
Information System c
College
FINANCIAL
MANAGEMENT- Document Developed by:
FMan223 No. Revision # 00
c/o Admin Mr. Eugene A. Ruano
MODULE CONTENT
COURSE TITLE: FINANCIAL MANAGEMENT
MODULE TITLE FINANCIAL FORECASTING, PLANNING AND

CONTROL
NOMINAL DURATION: 6 HRS
SPECIFIC LEARNING OBJECTIVES:

At the end of this module you MUST be able to:
1. Develop communication skills in articulating the result of survey and
research conducted in financial forecasting, planning & control for the
future application.
2. Understand the short-term operating/financial statements.
TOPICS:
1. Financial Forecasting for Strategic Growth
2. Forecasting Short-term Operating Financial Requirements
ASSESSMENT METHOD/S:
Multiple Choice
REFERENCE/S:
Financial Management Comprehensive Volume (2019-2020 Edition) by:
Ma. Elenita Balabat Cabrera and Gilbert Anthony B. Cabrera pp. 194-210 pp.
222-238
Bachelor of Science
January 2021
College
FINANCIAL
Information Sheet
FMAN 223-5
Financial Forecasting, Planning and Control

Learning Objectives:
After reading this INFORMATION SHEET, YOU MUST be able to:
1. Relate about short-term operating/financial requirements.
2. Understand the role of financial markets and institutions and
importance of financial statements.
Financial Forecasting, Planning and Control
A lack of effective long-range planning is commonly cited

reason for financial distress and failure. Long-range planning is a
means of systematically thinking about the future and anticipating
possible problems before they occur. Planning is said to be a
process that at best helps the firm avoid stumbling into the future
backward.
Bachelor of Science
January 2021
College
FINANCIAL
Bachelor of Science
January 2021
College
FINANCIAL
FINANCIAL FORECASTING FOR
STRATEGIC GROWTH
What is Financial planning?
Financial planning formulates the way in which financial goals are to be
achieved.
What are the benefits that can be derived from financial planning?
Possible problems
Interactions or
Provides a rational related to the
Linkages between
way of planning proposal projects are
investment proposals
options or identified actions to
are carefully
alternatives address them are
examined
studied
Managers are forced

Feasibility and
to think about goals
internal consistency
and establish
are ensured
priorities
Bachelor of Science
January 2021
College
FINANCIAL
Financial Planning Models
Economic Environment Assumption – the plan will have to state explicitly
the economic environment in which the firm expects to reside over the life of
the plan.
Sales forecast – an externally supplied sales forecast considered the “driver”
shall be the “heart” of all financial plans.
Bachelor of Science
January 2021
College
FINANCIAL
Determinants of Growth Rates
 Profit Margin – an increase in profit margin will increase the firm’s
ability to generate funds internally and thereby increase its
sustainable growth.
 Dividend Policy – a decrease in the percentage of net income paid
out as dividends will increase the retention ratio.
 Financial Policy – an increase in the debt-equity ratio increases the
firm’s financial leverage.
 Total asset turnover – an increase in the firm’s total asset turnover
increases the sales generated for each peso in assets.
Pro forma Statements – a financial plan will have forecast statement of
financial position, income statement, statement of cash flows and statement of
shareholders’ equity.
Asset Requirements – the financial plan will describe projected capital
spending.
Financial Requirements – the financial plan will include a section about the
necessary financing arrangements.
Additional Funds Needed (AFN) – after the firm has a sales forecast and an
estimate of the required operating on assets, some amount of new financing
will often be necessary because projected total assets will succeed projected
total liabilities and equity.
STEPS IN THE PROJECTED FINANCIAL STATEMENT METHOD
Forecast the income statement
Forecast the statement of financial

position
Raising the additional funds needed
Consider financing feedbacks
Bachelor of Science
January 2021
College
FINANCIAL
Financial Forecasting (Percent of Sales Method)
Example 1: The Millennium Company has the following statements which are
representative of the company’s historical average.
Income Statement
Sales 2,000,000
Cost of sales ______1.200,000
Gross profit 800,000
Operating expenses ________380,000

Earnings before interest and taxes 420,000
Interest expense _________70,000
Earnings before taxes 350,000
Taxes (35%) ________122,500
Earnings after taxes P 227,500
Dividends P 136,500
Statement of
Financial Position
Assets
Cash
P 50,000
Accounts receivable
420,000
Inventory
750,000
Current assets
P 1,200,000
Final assets (net)
800,000
Bachelor of Science
Bulacan
Total assets Date Developed:
January 2021
in Accounting Polytechni Date Revised:
Page 8 of 10
c
Information System P 2,000,000
Collegeand Equity
Liabilities
FINANCIAL
Document Developed by:
MANAGEMENT- Accounts payable
P 250,000
Accrued wages
The firm is expecting a 20 percent increase in sales next year, and
management is concerned about the company’s need for external funds. The
increase in sales is expected to be carried out without any expansion of fixed
assets, but rather through more efficient asset utilization in the existing store.
Among liabilities, only current liabilities vary directly with sales.
Using the percent-of-sales method, determine whether the company has
external financing needs or a surplus of funds.
Solutions:
Step 1: Forecast the Income Statement
Bachelor of Science
January 2021
College
FINANCIAL
I9
Step Sales 2,400,000 2:
Cost of sales ______1.440,000
Gross profit 960,000
Operating expenses ________456,000

Earnings before interest and taxes 504,000
Interest expense _________70,000
Earnings before taxes 434,000
Taxes (35%) ________151,900
Earnings after taxes P 282,100
Dividends (36% payment) P 101,500
Forecast the Statement of Financial Position
Assets
Cash P 60,000
Accounts receivable 480,000
Inventory 900,000
Current assets P 1,440,000
Final assets (net) 800,000
Total assets P 2,240,000
Liabilities and Equity
Accounts payable P 300,000
Accrued wages 12,000
Accrued taxes 24,000
Current liabilities P 336,000
Notes payable – bank 70,000
Long term debt 150,000
Ordinary shares 1,200,000
Retained earnings 480,500
Total P2,236,500
Additional financing required 3,500
Total P2,240,000
Formula method
Bachelor of Science
January 2021
in Accounting Polytechni Date Revised: Page 10 of
Information System c 10
College
FINANCIAL
Additional funds needed=required increase∈assets−spontaneous increase∈liabilities−increasenin retained ear
where:
current assets ( present)
Required increase∈assets=changes∈ sales x
sales( present)
current liabilities ( present)
Spontaneousincrease∈liabilities=changes ∈sales x
sales( present)
Increase ∈retained earnings=earnings after taxes−dividend payment
Bachelor of Science
January 2021
College
FINANCIAL
Applied to Millennium Co., AFN is computed as follows:
(
AFN = 400,000 x
1,200,000
2,000,000 )(
− 400,000 x
280,000
2,000,000 )
−282,100−101,600
¿ 240,000−56,000−180,500
= 3,500
FORECASTING SHORT-TERM OPERATING

FINANCIAL REQUIREMENTS
2W3
Budgeting – is the act of preparing a
budget. A budget is a financial plan of the
resources needed to carry out tasks and
meet financial goals.
The Purposes of the Budget
Coordinating
Defining Allocating
Budget
Setting Communicating
Motivating Uncovering
Bachelor of Science
January 2021
College
FINANCIAL
Bachelor of Science
January 2021
College
FINANCIAL
TYPES
OPERATING BUDGET
FINANCIAL
CAPITAL
INVESTMENT
OF
BUDGET
BUDGET
BUDGETS
OPERATING BUDGET
 Budgeted Income Statement
 Sales Budget
 Production Budget
 Costs of Sales Budget
 Selling and Administrative expenses budget
 Financial expenses budget
FINANCIAL BUDGET
 Budgeted Statement of financial position
 Cash Budget
 Budgeted Statement of sources and uses of funds
CAPITAL INVESTMENT BUDGET
Bachelor of Science
January 2021
College
FINANCIAL

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Financial Management

1 Introduction to Financial Management FMAN 223-1

2 Framework of Financial Management FMAN 223-2

Effects of the Economic Environment on Business

5 Financial Forecasting, Planning and Control FMAN 223-5

6 Working Capital Management FMAN 223-6

COURSE TITLE: FINANCIAL MANAGEMENT

MODULE TITLE FINANCIAL FORECASTING, PLANNING AND

NOMINAL DURATION: 6 HRS

SPECIFIC LEARNING OBJECTIVES:

Financial Forecasting, Planning and Control

Financial Forecasting, Planning and Control

A lack of effective long-range planning is commonly cited

Managers are forced

Forecast the income statement

Forecast the statement of financial

Raising the additional funds needed

Consider financing feedbacks

Operating expenses ________380,000

Operating expenses ________456,000

Dividends (36% payment) P 101,500

Forecast the Statement of Financial Position

FORECASTING SHORT-TERM OPERATING

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