Financial projections and Budgets

Strategic Planning
Strengths, Weaknesses, Opportunities, Threats
Financial Forecast
Budget
At the end of this lesson, the students can:
�Define strategic planning
�Describe financial forecast and budget vis-à-vis
strategic plan.
�Describe both internal and external factors that
should be considered when making financial
projections.
�describe budget and types of budget.
Strategic Plan

is the grand of any organization where

in the overall objectives are set and
specific programs are created in support
of the objectives.
Elements included in a strategic plan

1. Vision Statement – is a description of what the organization

aspires to be in the long term.
2. Mission Statement – is the organization core’s purpose. It
provides direction to the whole organization.
3. Corporate objectives – statements which outline the specific
goals, in line with the mission, that an organization would like
to achieve.
Jollibee food corporation

�Vision: To be one of the top 5 restaurant companies in

the world
�Mission: To serve great-tasting food, bringing the joy
of easting to everyone.
4. Corporate strategies – are concrete programs for specific business units, departments,
and/or cross-functional areas.

5. Departmental plans and programs – specific in terms of activities, the people responsible
for carrying out those activities, the timelines, the targets, the budget per activity.

6. Financial Forecast and Budgets – tie everything togethers. Departmental plans and
programs, specific targets, budgets, and forecast are made based on corporate objectives. The
forecast are both sales and expenses. Projected financial statements are also prepared.
Financial projections and Budgets
Strategic Planning
Strengths, Weaknesses, Opportunities, Threats
Financial Forecast
Budget
Strengths (internal)

�Is a resource that is owned or controlled by or is available

to a firm.
�Will give a firm an advantage over its competitors
�Some managers contend that for a resources or capability
to be considered a strength, It will have to be unique to
that firm.
Weaknesses (internal)

�Is a limitation which affects a firm’s

position relative to its competitors
�It may affect the way firm delivers
products and services to customers.
Opportunities (external)

� Situation in the external environment which the firm can

take advantage of.
� If a firm has enough resources which can be utilized to
take advantage of those opportunities, then the decision
makers of that firm will take those opportunities into
considerations in the process of making the financial
projections.
Threats (external)

�Is an unfavorable situation in a firm’s

external environment which may
adversely affect the way of a firm does
business.
“The key is for the firm to use its strengths to
take advantage of opportunities and counter the
threats, and to do something to improve on its
weaknesses.”
Financial Forecast
Strategic Planning
Strengths, Weaknesses, Opportunities, Threats
Financial Forecast
Budget
Financial forecast

�Financial plans begin with a sales forecast.

�A sale forecast is a projection of sales of product or

service expressed either units or monetary value. It is
generally based on past sales performance. Managers
normally review sales performance from five years back.
Factors that may affect future sales
performance

�Inflation rate
�Trends in the market
�Investment climate
Projected Financial Statements

- Is a financial projection that presents an entity’s expected financial position, results of

operations, and cash flow.
- These are the factors that need to be considered when preparing projected financial
statements.
 
1. Market conditions
2. Economy
3. Investment climate
4. Competitive position of the firm in the industry
5. SWOT
Financial Forecast
Strategic Planning
Strengths, Weaknesses, Opportunities, Threats
Financial Forecast
Budget
Budget

- Is a statement of projected sales, expenses, income, and other financial

transactions for the coming period. It’s a firms financial plan.
- A budget serves two purposes; a tool for planning, and a tool for control.

Types of Budget
- There are two types of budget: operation budget and financial budget.
 The operating budget is a detailed projection of all income and
expenses for a given period of time, which is usually one year. An
operating budget includes several sub-budget. They are the following:

1. Sales budget
2. Production budget
3. Direct materials budget
4. Direct labor budget
5. Factory overhead budget
6. Selling and administrative expense budget
7. Income statement
 The financial budget shows the impact of the planned operations and capital
investments on a form’s assets, liabilities, and owner’s equity. It is also
showing the flow of cash and other funds on the business. The financial
budget includes the following:

1. Cash budget
2. Statement of financial position
 
Preparing the budget

1. Preparation of a sales forecast.

2. Determining production volume in support of the sales forecast.
3. Estimating manufacturing costs and operating expenses.
4. Estimating cash flow
5. Preparation of financial statement
Asynchronous task
SWOT ANALYSIS