FM-financial Planning

8/14/2019 FM-financial Planning

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finp Paramjit sharma

financial

planning
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What is Financial Planning?Why Financial Planning?


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Financial Planning

The Process ofEstimating the funds

requirements of a firm &determining the sources of funds..
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Sales


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Sales

Fixed

Assets

Current

Assets

CreditSales

Raw

Materials

CreditPurchase

Expenses

Internal

Funds

External

Funds


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Financial Planning indicates

Economic AssumptionsGrowth of a firm (Sales Forecast)

Performance (Projected P& L& BS)Investments (Assets Requirements)Cash Budget

in a particular time


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It involves preparation of

Projected

Sales Forecast

Profit and Loss Account

Balance Sheet &

Funds flow statement

Cash Flow Statement


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profit

planning


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Profit Planning

Detailed plan of action

through budget for a year or less


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Budget:

a forecast of future

events.


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What is the difference between

Budget

Budgeting

Budgetary Control


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A Budget is a financial and/orquantitative Statement, prepared &

approved prior to a defined period oftime, of the policy to be pursuedduring that period for the purpose of

attaining given Objective

Budget


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The Technique ofPreparing Budgets

Budgeting


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Budgetary Control

Budgetary Control is theBudgetary Control is the establishmentestablishment

of Budgets relating to theof Budgets relating to the responsibilitiesresponsibilities

of executives of a policy and the continuousof executives of a policy and the continuous

comparisoncomparison of the actual with the budgetedof the actual with the budgeted

results, either to secure by individual actionresults, either to secure by individual action

thethe objectiveobjective of the policy or to provideof the policy or to providebasis for itsbasis for its revisionrevision


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Budgetary Control

Characteristics

Establishment of Budgets

Analysis Of Variation

Taking Remedial Action

Revision Of Budgets


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financial

forecasting


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The Process of analyzing currentfinancial and historical data to

determine future needs

Financial Forecasting


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Project sales revenues and exp..

Estimate current assets and fixedassets necessary to support

projected sales.

Percent of sales forecast



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1Current & Historical Financial Information

2 Percentage of Sales

3 Projected Statements


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Financial Information


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Profit & Loss Account

For the year ended 31 March

238.3

138.7

99.6

19.3

27.1

19.1

65.5

34.1

18.6

15.5

8.2

7.3

3.0

4.3

206.2

123.7

82.7

16.8

25.0

15.5

57.3

25.4

17.8

7.6

3.9

3.7

3.0

0.7

183.0

104.7

78.3

12.9

23.2

13.4

49.5

28.8

16.0

12.8

6.2

6.6

3.0

3.3

152.0

87.7

64.3

11.6

21.1

12.9

45.6

18.7

11.1

7.6

3.6

4.0

1.5

2.5

139.0

81.2

57.8

10.3

20.1

11.6

42.0

15.8

9.8

6.0

2.8

3.2

1.5

1.7

Net sales

Cost of goods sold

Gross Profit

Administrative

expensesSelling expenses

Other expenses

Non-manufacturing

expenses

PBIT

Interest

PBT

Tax

PAT

Dividends

Retained earnings

20052004200320022001

Rs in Crores


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20052004200320022001

Rs in Crores Balance Sheets

as on year ended 31 st March

Sources of Funds

Net Worth

Share Capital 40.0 40.0 40.0 40.0 40.0Reserves 12.1 14.6 17.9 18.6 22.9

Net Worth 52.1 54.6 57.9 58.6 62.9

Borrowings 67.0 71.8 96.0 110.8 114.8

Capital Employed 119.1 126.4 153.9 169.4 177.7

B l Sh


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20052004200320022001

Rs in Crores Balance Sheets

as on year ended 31 st March

Uses Of Funds

Net Fixed Assets

Gross Block 86.1 92.3 99.3 115.8 141.5

Less Ac Depr 30.2 34.3 38.7 45.9 54.1

Net Block 55.9 58.0 60.6 69. 9 87.4

Capital WIP 3.4 4.6 10.3 17.3 7.0

Net Fixed Assets 59.3 62.6 70.9 87.2 94.4

Current Assets

Inventory 97.4 110.3 122.5 119.4 122.7

Debtors 47.4 67.8 108.3 126.3 127.9

Cash at Bank 5.4 2.8 3.9 6.4 11.6

Others 17.0 14.8 17.0 22.2 23.5

Current Assets 167.2 195.3 251.7 274.3 285.7

Less C Liabilities 107.4 133.5 168.7 192.1 202.4

Net C Assets 59.8 61.8 83.0 82.2 83.3

NET ASSETS 119.1 124.4 153.9 169.4 177.7


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% of Sales


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% of Sales

58.3

7.7

12.97.9

7.9

2.7

58.2

8.1

11.48.0

7.8

3.1

60.0

8.1

12.17.5

8.6

1.8

57.2

7.0

12.77.3

8.7

3.6

57.7

7.6

13.98.5

7.3

2.3

58.4

7.4

14.58.3

7.1

2.3

PERCENTAGE OF SALES

Cost of goods sold

Administrative

expenses

Selling expensesOther expenses

Interest

PAT

Average20052004200320022001


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% Of Sales

40.9

63.8

50.6

3.2

10.3127.8

87.1

40.8

81.7

39.6

51.5

53.7

4.9

9.9119.9

84.9

35.0

74.6

42.3

57.9

61.3

3.1

10.8133.0

93.2

39.9

82.2

38.7

66.9

59.2

2.1

9.3137.5

92.2

45.4

84.1

41.2

72.6

44.6

1.8

9.5128.5

87.8

40.7

81.8

42.7

70.1

34.1

3.9

12.2120.3

77.3

43.0

85.7

Balance sheet itemsNet fixed assets

Inventory

Debtors

Cash and bank balance

Other current assetsCurrent assets

Current liabilities

Net current assets

Net assets

Aver-

age20052004200320022001


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1.23

13.2

16.2

20.1

2.59

8.6

49.6

4.4

14.5

1.34

14.3

19.2

21.4

2.83

11.6

58.9

6.8

15.6

1.22

12.3

15.0

14.6

2.89

6.3

18.9

1.2

12.7

1.19

12.3

15.0

14.6

2.89

6.3

18.9

1.2

12.7

1.22

12.3

15.0

21.4

2.28

7.3

62.

4.69.4

1.17

11.4

13.3

20.3

2.29

6.1

53.1

3.3

-

PROFITABILITY ANALYSIS

Assets turnover : NS/NA

Profit margin : PBIT/NS (%)

Return on investment :

PBIT/NA

Leverage factor : PAT/PBIT

Debt Ratio : NA/NW(i.e.1+D/F)

Return on equity : PAT/NW

Retention Ratio :RE/PAT (%

Growth in equity : RE/NW (%

Growth in Sales (%)

Avera-

ge

20052004200320022001

Profitability Analysis


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projectedstatements


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Assumptions

Sales Growth 15%Net Margin 3%

Net Assets to Sales 75% (40% Fixed %35% current)

Tax Rate 50%Dividend 10% of Paid up Capital


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Projected Profit & Loss Account

2006 2007 2008 2009 2010

Net Sales 274.0 315.2 362.4 416.8 479.3

COGS 159.5 183.4 210.9 242.6 279.0

Gross Profit 114.5 131.8 151.5 174.2

200.3

Non Mfg. Expenses 75.1 86.4 49.3 114.2 131.3

PBIT 39.4 45.4 52.2 60.0 69.0

Interest 23.0 26.4 30.4 35.1 40.1

PBT 16.4 19.0 21.8 24.9 28.9

Tax 8.2 9.5 10.9 12.4 14.4

PAT 8.2 9.5 10.9 12.5 14.5

Dividend 4.0 4.0 4.0 4.0 4.0

Retained Earnings 4.2 4.5 6.9 8.5 10.4


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Projected Balance Sheet

2006 2007 2008 20009 2010

Share Capital 40.0 40.0 40.0 40.0 40.0

Reserves 27.1 32.6 39.5 48.0 58.4

Net worth 67.1 72.6 79.5 88.0 98.4

Borrowings 138.4 163.8 192.3 224.7 261.1

Capital Employed 205.5 236.4 271.8 312.7 359.5

Net Fixed Assets 109.6 126.1 145.0 166.7 191.7

Net C Assets 95.9 110.3 126.8 146.0 167.8

Net Assets 205.5 236.4 271.8 312.7 359.5


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Projected Funds Flow Statement

2006 2007 2008 20009 2010

Retained Earnings 4.2 5.5 6.9 8.5 10.4

Funds Needed 23.6 25.4 28.5 32.4 36.4

Sources 27.8 30.9 35.4 40.9 46.8

Net Fixed Assets 15.2 16.5 18.9 21.7 25.0

Net Current Assets 12.6 14,4 16.5 19.2 21.8

Uses 27.8 30.9 35.4 40.9 46.8


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Steps in Financial Planning

Past Performance

Operating Characteristics

Corporate Strategy & Investment Needs

Cash Flow from Operations

Financial Alternatives

Consistency


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? ????

FM-financial Planning

Documents

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