Grade 12 BUSINESS FINANCE week 3ptp.pptx

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1. BUSINESS FINANCE THE STEPS IN FINANCIAL PLANNING PROCESS AND THE FORMULA AND FORMAT FOR THE BUDGET PREPARATION AND PROJECTED FINANCIAL STATEMENT

2. OBJECTIVES At the end of the lesson, the students shall be able to: Determine and apply the tools used in planning and forecasting State and apply the tools used in budgeting Illustrate the formula and format for the preparation of budgets and projected financial statements.

3. REVIEW OF THE PAST LESSON Financial institutions serves as intermediary to the suppliers and users of funds and actively participate in the financial markets as both suppliers and users of funds. Financial instruments are the transfers of funds from one party to another. The financial markets provide a forum in which firms can issue securities to obtain the funds that they need and in which investors can purchase securities to invest their funds.

4. INTRODUCTION All individuals, professionals, businessmen will have their goals to be in profession or business.However , about objectives at business finance, we have to plan them. You should know how you can save a lot, you must know your goals. Here is the step by step financial planning process to structure your goals.

5. The long-term goals that you plan to achieve in the future, play an important role in everyday life as you already have in mind a set of plans for the next five years. If you are not yet sure what you want in five years from now will probably still have an idea of what kind of life you want. You are still in the process of planning. Planning is an important aspect of the firm’s operations because it provides road maps for guiding, coordinating, and controlling the firm’s actions to achieve its objectives. Management planning is about setting the goals of the organization and identifying ways on how to achieve them.

6. PHASES OF FINANCIAL PLANNING Financial planning starts with long-term plans which would then translate to short-term plans.

7. STRATEGIC vs. TACTICAL PLANNING Long-term financial plans or the strategic plans are a set of goals that lay out the overall direction of the company. A long-term financial plan is an integrated strategy that takes into account various departments such as sales, production, marketing and operations for the purpose of guiding these departments towards strategic goals. Those long-terms plans considered proposed outlays for fixed assets, research and development activities, marketing and product development actions, capital structure, and major sources of financing. It also include would be termination of existing projects, product lines , or lines of business; repayment or retirement of outstanding debts; and any planned acquisitions.

8. Short-term financial plans or the tactical plans specify short-term actions and the anticipated impact of those actions. Part of short-term financial plans include setting the sales forecast and other forms of operating budgets, the cash budget, and pro forma financial statements.

9. THE FINANCIAL PLANNING PROCESS STEP 1: Determine your current financial situation. In this step of the financial planning process, you will determine your current financial situation with regards to income, savings, living expenses, and debts. Preparing a list of current asset and debt balances and amounts spent for various items gives you a foundation for financial planning activities.

10. LONG-TERM PLANNING SHORT-TERM PLANNING Person’s Involved More participation fro top management Top management is still involved but there is more participation from lower level managers( production, marketing , personnel, finance and plant facilities) Time Period 2 to 10 years 1 year or less Level of Detail Less More Focus Direction of the company Everyday functioning of the company

11. STEP 2: DEVELOP FINANCIAL GOALS You should periodically analyze your financial values and goals. This involves identifying how you feel about money and why you feel that way. can The purpose of this analysis is to differentiate your needs from your wants. Specific financial goals can range from spending all of your current income to developing an extensive savings and investment program for your future financial security.

12. STEP 3: IDENTIFY ALTERNATIVE COURSES OF ACTION Developing alternatives is crucial for making good decisions. Although many factors will influence the available alternatives, possible courses of action usually fall into these categories: Continue the same course of action Expand the current situation Change the current situation Take a new course of action

13. Not all of these categories will apply to every decision situation: however they do represent possible courses of action Creativity in decision making is vital to effective choices.

14. STEP 4: EVALUATE ALTERNATIVES You need to evaluate possible courses of action , taking into consideration your life situation, personal values, and current economic conditions.

15. Consequences of Choices. Every decision closes off alternatives. For example, a decision to invest in stock may mean you cannot take a vacation. A decision to go to school full time may mean you cannot work full time. Opportunity cost is what you give up by making a choice. Decision making will be an ongoing part of your personal and financial situation. Thus, you will need to consider the lost opportunities that will result from your decision.

16. Evaluating Risk. In many financial decision, identifying and evaluating risk is difficult. The best way to consider risk is to gather information based on your experience and the experiences of others and to use financial planning information sources.

17. Financial Planning Information Sources. Relevant information is required at each stage of the decision making process. Changing personal, social and economic conditions will require that you continually supplement and update your knowledge.

18. STEP 5: CREATE AND IMPLEMENT A FINANCIAL ACTION PLAN In this step of the financial planning process, you develop an action plan. This requires choosing ways to achieve your goals. As you achieve your immediate or short term goals, the goals next in priority will come into focus . To implement your financial action plan, you may need assistance from others. For example , you may use the services of an insurance agent to purchase property insurance or the services of an investment broker to purchase stocks, bonds, or mutual funds.

19. STEP 6: RE-EVALUATE AND REVISE YOUR PLAN Financial planning is dynamic process that does not end when you take a particular action. You need to regularly assess your final decision. Changing personal, social and economic factors may require more frequent assessment. When life events affect your financial needs, this financial planning process will provide a vehicle for adopting to those changes.

20. FIGURE THAT REPRESENTS FINANCIAL PLANNING PROCESS

21. FORMULA AND FORMAT FOR THE PREPARATION OF BUDGETS AND PROJECTED FINANCIAL STATEMENT In planning, the goal of maximizing shareholder’s wealth must always be put in mind.

22. CRITERIA FOR AN EFFECTIVE PLANNING SPECIFIC - target a specific area for improvement. MEASURABLE- quantify or at least suggest an indicator of progress. ASSIGNABLE - specify who will do it. REALISTIC - state what results can realistically be achieved , given available resources. TIME-RELATED - specify when the results can be achieved. Theres a S.M.A.R.T way to write management’s goals and objectives.

23. WRITE YOUR INSIGHTS ABOUT THE FOLLOWING 1. What is budget? 2. What is the importance of a budget? 3. What will happen if the budget is not met?