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Financial Forecasting, Corporate Planning and Budgeting

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Nicole John Tomes

on 18 September 2013

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Transcript of Financial Forecasting, Corporate Planning and Budgeting

Financial Forecasting, Corporate Planning and Budgeting
design by Dóri Sirály for Prezi
entails the creation of both short-range and long-range objectives as well as seasonal financial targets.
Pro-Forma Statement of Financial Position (SFP)
Pro-forma income statement
pro-forma cash budget
prior period pro-forma statement of financial position
Financial Plans
- guide company operations.
- serves as guides in taking corrective
Corporate Planning
is defined as a formal, systematic, managerial process, that is organized by responsibility, time and information to assure that 3 forms of corporate planning.
3 Forms of Corporate Planning
Strategic planning
project planning
operational planning
Strategic Planning
Operational Planning
is much concerned on how to efficiently and effectively utilize the entity's resources to achieve the company's short-term and long-term objectives set up during strategic planning.
this involves the creation of strategies that are aimed in maximizing the entity's future position taking into consideration the various elements and factors that may pervade the company's internal and external environment.
Project Planning
sometimes called as capex planning or capital expenditure planning. entails detailed plans involving acquisition of new property, plant and equipment, creation of new products, modification or acquisition or adoption of new systems, and acquisition of new entities.
process of expressing quantified resource requirements (amount capital, amount material, number of people) into time-phased goals and milestones.
The next step after corporate planning is quantifying in terms of monetary value
Firm budget

- serves as a Barometer
Rolling Budget
may also be done when a company makes a whole year budget then makes new budgets on a monthly or quarterly basis.
to which the results of the daily operation of the company are matched, coordinated, evaluated and controlled.
Reasons for Budgeting
is the process by which a company or individuals evaluate their earnings and expenses and project their monetary intakes and outtakes for the future.
is a term that is used to describe the process of managing individual line items within a household or business budget so that expenditures over and above the allocated amounts do not take place.
develops the annual FM Departmental budget submission, and provides oversight of Departmental financial performance by coordinating, reviewing and monitoring monthly and fiscal management budgets reports.
Budget Manuals
is usually prepared by management
definition of authority
responsibilities and duties of person involved in preparing the budget
procedure of budgetary control
time schedule for preparing the budget
forms of schedules
procedures in obtaining budget approval
form and nature of performance report
advantages of budgetary control
Budget manual may be composed of the following:
Master Budget
A company-wide budget.
defined as a formal statement of a plan presented in quantitative terms.
Operation Budget/Profit Plan
cost of raw materials
no. of raw materials units to be purchased
cost of direct labor
factory overhead
inventory levels
cost of goods sold
selling expenses
administration expenses
financing charges
Financial Resources Budget
Pro-forma or budget Statement of Financial Position.
Projected Funds flow statement.
Capital Expenditures Budget
This involves plans on material modification, acquisition and disposal of property plant and equipment or material modification, acquisition or renewal of a firm's computerized accounting information system.
composed of a detailed presentation of revenues expenses and net profit
Budgeted Financial Ratios
The ratios are taken from the pro-forma or budgeted financial statements prepared.
Process Preparing Pro-forma Statements
(In reference to the Budget components and Budgetary process)
Methods that are used in estimating or forecasting sales
Sales Trend Analysis
In this method, the product life cycle is used in making the forecast.
Sales Force Composite Method
In this method, each salesman estimates the sales in his particular territory.
Multiple Approach Method
This method uses a combination of the various method discussed.
sales Volume
Executive Opinion Method
In this method, the views of a number of top executives are culled to arrive at a sales estimate.
Industry Trend Analysis Method
In this method, the relationship between expected industry sales and the company sales in terms of market share is determined.
Correlation Analysis Method
this is more scientific means of forecasting sales by using regression.
Cash Budgets
Components of Master Budget
Components of Master Budget
net cash flow =
Budget income statement
Smaller time frames
Operation Budget/ Profit Plan
1. Targeted Sales are Estimated
2. & 3. Individual Budgets/Plans (Production, Marketing, raw materials inventory levels, selling and administrative expenses, etc)
Financial Resources Budget
4. Pro-forma Income Statement
5. Cash Budget
7. Capital Expenditures Budgets & other supportive
6. Pro-Forma Statement of Financial Position (SFP)
Prior Period SFP
Pro-Forma Income Statement
Assume you are tasked to prepare the pro-forma financial statements of Ocin Corporation, June 30, 2020. Ocin Corporation is the leading producer and seller of DVD and Blue Ray players in the market. Consider figures below to facilitate the preparation of the pro-forma financial statements:
Step 1: Estimate Sales:
Table 1
Assumed Projected Sales of DVD and Blue Players (first 6 months of 2020)

Step 2: Estimate Number of Units to be Produced ad the the Gross Profit
Table 2
Assumed Stock of Beginning Inventory
Table 3
Computation of estimated number of units to produce
Table 4
Assumed Cost per unit
Table 5
Computation of Estimated Production Costs
Table 6
Computation of Cost of Good Sold and Gross Profit
Table 7
Computation of the Cost of Ending Inventory
Table 8
Ocin Corporation
Pro-Forma Income Statement
For the 6 month Period Ended June 30,2020
Step 4: prepare the Cash Budget
Table 9
Summary of Month Cash Receipts
Table 10
Computation of the composition of production costs
Table 11
Computation of the Average monthly production costs
Table 12
Summary of the Monthly Cash Payments (in Php)
Table 13
Monthly Cash Flow
Table 14
Cash Budget (including borrowing and repayment)
Ocin Corporation
Statement of Finacial Position
December 31, 2019
Ocin Corporation
Pro-forma statement of Financial Position
June 30, 2020
Gillian COrporation
Statement of Financial Position & Corresponding Percentage of Sales
(In Thousand Pesos for the Value)
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