BUSINESS FINANCE

• Financial Planning is an ongoing process to help you make sensible decisions about money that can help you achieve your goals in life.
• Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives.
• Financial Planning is the process of estimating the capital required and

  determining its competition.
• Financial Planning does not exist and operate as an independent activity in the organization. It is an offshoot of interrelated planning activities happening in various sections and levels of organization.
• Vision - It conveys the ultimate goal of the organization. It outlines the final map of what the business will be and where the business is going.
• Mission - It sets the current business activities and outlines what the business is for.
• Goal - It states where all the activities and operation of the business are directed. Moreover, it sets in a more specific medium the general end of the business.
• Step 1

  • Forecast on Sales, Costs, Expenses, and Capital Expenditure
• Step 2

  • Preparation of the projected Financial Statements
• Step 3

  • Analysis and evaluation of the projected Financial Statements
• Step 4

  • Review and Evaluation of the projected financial plan
• Sales Forecast - A forecast of future sales based on past sales and other information.
• Steps to compute for Sales Forecast

  1. Compute for the percentage of change;
  2. Compute for the average change in percentage; and
  3. Multiply the latest sales by the average change in percentage
• Production Schedule - this forecasts the number of units and cost of raw materials, direct labor cost, manufacturing overhead cost, and desired inventory level. This schedule is highly dependent on sales forecast.
• Budgeting - refers to a plan which is expressed in quantitative monetary

  value. It serves as a medium to control the financial activities of

  the business.
• Persons involved in Budget Preparation

  • Budget Committee
  • Marketing Division
  • Finance Division
  • Production Division
  • Administrative Division
• Intermediate Budget - this sets the money needs for the business over the next three to five years and gets looked at almost yearly to see if any changes are needed because of new developments.
• Strategic Budget - this maps out the business's goals for the next five or ten years, led by top management.
• Short-term Budget - this shows what each department needs financially for one year. It is made every year by all levels of management.