GOOD AFTERNOON

CLASS!!!
Financial Planning
By: Edelwin Fajutagana
Intended Learning Outcomes:
At the end of the topic, the students will be able to:
• understand what financial planning means;
• identify the different component of financial planning;
• understand how to start a financial planning by some
comprehensive examples given.

Financial Planning
Constructing Pro Forma Statement:
A systems approach to develop pro forma statements consists
of:
1. Constructing it based on:
• Sales projection
• Production plans
2. Translating it into a cash budget
3. Assimilating all materials into a pro forma balance sheet

Financial Planning
Development of Pro Forma Statements:

• ..

Financial Planning
Development of Pro Forma Statements:
 Provides a projection on the anticipation of profits over a
subsequent period
 Four important steps include:
1. Establishing a sales projection
2. Determining production schedule and the associated use of new
materials, direct labor and overhead to arrive at gross profit
3. Computing other expenses
4. Determining profit by completing actual pro forma statement

Financial Planning
Establish a Sales Projection
Assume Lulu Corporation has two primary products: Wheels and Casters:

Financial Planning
Stock of Beginning Inventory
Number of units produced will depend on beginning inventory

Financial Planning
Determine a Production Schedule and the
Gross Profit
To determine the production requirements:
Units
+ Projected sales
+ Desired ending inventory
- Beginning inventory
= Production requirements

Financial Planning
Production Requirements

Financial Planning
Unit Costs
Cost to produce each unit:

Financial Planning
Total Production Costs

..

Financial Planning
Cost of Goods Sold
Costs associated with units sold during the time
period
- Assumptions for the illustration:
• FIFO accounting is used
• First allocates the cost of current sales to
beginning inventory
• Then to goods manufactured during the period

Financial Planning
Allocation of Manufacturing Cost and
Determination of Gross Profits

Financial Planning
Getting the Value of Ending Inventory
To determine the Ending Inventory Requirements:
+ Beginning Inventory $ 4,960
+ Total Production costs $62,710
Total inventory available for sales 67,670
- Cost of good sold 61,470
= Ending Inventory $ 6,200

Financial Planning
Projection of Other Expenses:
Must be subtracted from gross profits to arrive at net profit
 Earning before taxes
• General and administrative expenses, and interest expenses are
subtracted from gross profit
 After-tax income
• Taxes are deducted from the earning before taxes
 Contribution to retained earnings
• Dividends are deducted from the after-tax income

Financial Planning
Actual Pro Forma Income Statement

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Financial Planning
Comprehensive Problem:

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Financial Planning
Comprehensive Problem:
Required: Prepare for the following (quarterly basis)
 Sales Projection
 Cash Collections
 Purchases
 Cash disbursements for purchase
 Operating expenses and disbursement for expenses (except interest)
 Proforma income statement

Financial Planning
Solution:
Schedule of Sales Projection:
April May June Total

Credit Sales (80%) 56,000.00 68,000.00 72,000.00 196,0000.00

Cash Sales (20%) 14,000.00 17,000.00 18,000.00 49,000.00

Total Sales 70,000.00 85,000.00 90,000.00 245,000.00

Schedule of Cash Collections:

April May June Total

Cash Sales 14,000.00 17,000.00 18,000.00 49,000.00

Collection from prior

48,000.00 56,000.00 68,000.00 172,000.00
month
Total Sales 62,000.00 73,000.00 86,000.00 221,000.00
Solution:
Schedule of purchases
April May June Total
Desired Ending Inventory 15,300.00 16,200.00 9,000.00 40,500.00
Cost of goods sold 42,000.00 51,000.00 54,000.00 147,000.00
Less: Beginning Inventory 12,600.00 15,300.00 16,200.00 44,100.00
Total Purchases 44,700.00 51,900.00 46,800.00 143,400.00

Schedule
Total Salesof Cash Disbursement
(100%) (Purchase)
70,000.00 85,000.00 90,000.00 245,000.00
COS ( 60%) Comes from B/S Accounts Payable
Gross
For Profit
March ( 40%)
amount (previous) 18,300.00 18,300.00
For April 22,350.00 22,350.00 44,700.00
For May 25,950.00 25,950.00 51,900.00
For June 23,400.00 23,400.00

Financial Planning
Solution:
Schedule of Operating Expenses and Disbursement for expenses except interest

Financial Planning
Solution:
Proforma Income Statement

Financial Planning
END
“The secret of your future is hidden in your daily
routine.”

– Mike Murdock
Thank you
And
keep safe