Financial Planning Process

1. Financial planning and
forecasting
By- PE-06,07,08,09,10

2. INTRODUCTION

3. FUN FACT!!
Let’s say you have 10L rupees. You invest it somewhere. And let’s say you are 26
years of age. Now, let’s see which mode of investment will give the maximum
compounding effect in next 24 years.
Fixed deposit
Real estate
Policies
Gold
BSE(1979-2018)
NSE(1995-2018)

4. FUN FACT!!
Let’s say you have 10L rupees. You invest it somewhere. And let’s say you are 26
years of age. Now, let’s see which mode of investment will give the maximum
compounding effect in next 24 years.
Fixed deposit 8% 1000000
Real estate 10% 1000000
Policies 6-8% 1000000
Gold 10% 1000000
BSE(1979-2018) 16% 1000000
NSE(1995-2018) 11% 1000000

5. FUN FACT!!
Let’s say you have 10L rupees. You invest it somewhere. And let’s say you are 26
years of age. Now, let’s see which mode of investment will give the maximum
compounding effect in next 24 years.
Fixed deposit 8% 1000000 ~6350000
Real estate 10% 1000000 ~9850000
Policies 6-8% 1000000 ~5075000
Gold 10% 1000000 ~9850000
BSE(1979-2018) 16% 1000000 ~35250000
NSE(1995-2018) 11% 1000000 ~12500000

6. FUN FACT!!
SYSTEMATIC INVESTMENT PLAN

9. Financial Planning
Deciding in advance how to spend and on what to spend.

10. Financial Forecasting
● A financial forecast is an estimate of future financial
outcomes for a company. Financial forecasts estimate
future income and expenses for a business over a period
of time, generally the next year.
● It is the way for a firm to think about an dprepares for the
future.

11. FINANCIAL PLANNING

12. Definition of financial planning:
● In simple words Financial Planning can be defined as “the process of
estimating the capital required and determining it’s composition. It is the
process of framing financial policies in relation to procurement,
investment and administration of funds of an enterprise.”

13. Objectives of Financial Planning:
● Determining capital requirements- This will depend upon factors like cost of
current and fixed assets, promotional expenses and long- range planning.
● Determining capital structure- The capital structure is the composition of
capital.
● Framing financial policies with regards to cash control, lending, borrowings,
etc.
● A finance manager ensures that the scarce financial resources are maximally
utilized in the best possible manner at least cost in order to get maximum
returns on investment.

14. Importance of Financial Planning:
● Adequate funds have to be ensured.
● Financial Planning helps in ensuring a reasonable balance between outflow
and inflow of funds so that stability is maintained.
● Financial Planning ensures that the suppliers of funds are easily investing in
companies which exercise financial planning.
● Financial Planning helps in making growth and expansion programmes which
helps in long-run survival of the company.
● Financial Planning reduces uncertainties with regards to changing market
trends which can be faced easily through enough funds.
● Financial Planning helps in reducing the uncertainties which can be a
hindrance to growth of the company. This helps in ensuring stability and
profitability in concern.

15. Financial Planning Process:
Step 1: Determine Current Financial Situation
Step 2: Develop Financial Goals
Step 3: Identify Alternative Courses of Action
Step 4: Evaluate Alternatives
Step 5: Create and Implement a Financial Action Plan
Step 6: Reevaluate and Revise Plan

16. FINANCIAL FORECASTING

17. Objectives of Financial Forecasting:
● Unlike a financial plan or budget, a financial forecast does not have
to be used as a planning document.
● Outside analyst can use a financial forecast to estimate a company’s
success in the coming year.

18. Financial forecasting:
● Income statement
● Balance Sheet
● Cash flow Statement

19. Income statement assumptions:
● Sales growth
● Relationships to sales
Cost of goods sold
Operating expenses
● Interest based on debt balance and interest rates
● Taxes based on tax rates

20. Balance Sheet assumptions:
● Relationships to sales
Working capital
Capital Expenditure (based on capacity level)
● Company policy
New debt
New equity
Dividends

21. Basic cash flow statement:
It is a financial statement that shows how changes in balance sheet
accounts and income affect cash and cash equivalents, and breaks the
analysis down to operating, investing, and financing activities.
Basically, the cash flow statement is concerned with the flow of cash in
and out of the business.

22. THANK YOU