...Assignment Chapter 14 True/False Indicate whether the statement is true or false. __F__ 1. Pro forma financial statements, as discussed in the text, are used primarily to assess a firm's historical performance. __T__ 2. The first, and most critical, step in constructing a set of pro forma financial statements is the sales forecast. __T__ 3. A typical sales forecast, though concerned with future events, will usually be based on recent historical trends and events as well as on forecasts of economic prospects. __F__ 4. Errors in the sales forecast can be offset by similar errors in costs and income forecasts. Thus, as long as the errors are not large, sales forecast accuracy is not critical to the firm. __T__ 5. As a firm's sales grow, its current assets also tend to increase. For instance, as sales increase, the firm's inventories generally increase, and purchases of inventories result in more accounts payable. Thus, spontaneously generated funds arise from transactions brought on by sales increases. __T__ 6. The term "spontaneously generated funds" generally refers to increases in the cash account that result from growth in sales, assuming the firm is operating with a positive profit margin. __F_ 7. A rapid build-up of inventories normally requires additional financing, unless the increase is matched by an equally large decrease in some other asset. ((( Increase in liabilities to suppliers) __F__ 8. If a firm wants to maintain its ratios...
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...Financial Modeling Templates Financial Forecasting (Pro Forma Financial Statements) http://spreadsheetml.com/finance/financialplanningforecasting_proformafinancialstatements.shtml Copyright (c) 2009, ConnectCode All Rights Reserved. ConnectCode accepts no responsibility for any adverse affect that may result from undertaking our training. Microsoft and Microsoft Excel are registered trademarks of Microsoft Corporation. All other product names are trademarks, registered trademarks, or service marks of their respective owners Table of Contents 1. Financial Planning and Forecasting ................................................................................... 1-1 1.1 Pro Forma Financial Statements ............................................................................... 1-1 1.2 Financial Statements Modeling .................................................................................. 1-1 Financial Planning and Forecasting Spreadsheet ............................................................. 2-2 2.1 Financial Statements Inputs ....................................................................................... 2-2 2.1.1 Income Statement ......................................................................................... 2-2 2.1.2 Balance Sheet ............................................................................................... 2-3 2.2 Common Size Financial Statements ..................................................................
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...Financial Planning Financial planning involves budget, financial map or operating guide (Principles of Accounting, n.d.). Financial planning has many functions: a breakdown of budget, money coming in, and money going out - except the money going out is all planned and knowing where it will go or end up. Financial planning is making plans to attain that goal – money wise. Financial planning provides many elements for detailed sales targets, staffing plans, inventory production, cash investments and borrowing capital expenditures for plant assets and others. It also involves risk management. Proper financial planning gives the company guidance on how to proceed with expenses and funds. Better financial planning leads to proper prioritizing of goals and work towards long-term goals. Financial planning involves strategic plan which includes the plan that supports the mission, vision and values of the organization. Operating plans which includes a detailed guidance to help organizations realize its strategic vision. Financial Plan which involve the forecasting of financial statements, the amount of money that supports the plan, forecasting of funds, performance-based management system, and the monitoring of operations after executing the plan to check any nonconformities and take actions towards it. (Ehrhardt and Brigham, 2011). Financial planning helps the companies minimize costs and maximize profits. One method of financial planning is the Additional...
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...Leitax 2004 Leitax 2004 Analysis of the new forecasting process Analysis of the new forecasting process Assignment questions 1. Based on the description of planning system before the Redesign Project which function or individuals should be held responsible for the planning problems in FY 2002? In FY 2004? In 2002, Leitax had suffered through poor planning of 3 camera models: the launch of one camera delayed (cost: $19.5 million), another outsold its inventory (costs: $4.5million) and a third model reported sluggish sales ($2.5million). To compensate, Leitax extended the life of an existing model and made a mad scramble to find product and customers but the most costumers preferred to wait for the delayed camera. These events reflect the failure to manage the planning and the operational efficiency. The problem was general because groups did not communicate between them and if the operator group disagreed with the financial group, each group did its own forecasts => lack of cooperation and coordination. These departments should be held responsible largely for the planning problems because they did not perform their job well enough: -Marketing Department: This department should study and evaluate the market trend. -Sales Department: This department is very close to the customers. So, they know the feedback and customer behavior towards the products and can carry on information to another relevant departments to project the sales forecast. -Production...
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...FACTORS AFFECTING PLANNING Conditions • Evaluating the present conditions of the business • Change happens unexpectedly Time Factor • Time is the most precious resource of an organization • Managers are given a span of time within which to bring out plans into implementation Resources Available • There must be enough funds and materials available for the purpose of putting plans into effect Skills and attitudes of management • An attitude of indifference and non – involvement could but spell failure to any planning Political, social, and environmental conditions • Social and economic conditions of the community Physical Facilities • Science and technology • Plants and equipments Collection and analysis of data • Information is the greatest resource • Acquisition, organization and interpretation of data POLICIES AND CLASSIFICATIONS Policies are guides to managerial decisions which fall under certain limits or boundaries These are formulated by management to govern actions at all levels As to Origin Imposed policies Are those required by the government as laws, procedures and administrative orders Appealed policies Are formulated when a subordinate endorses to his superior matters not covered by existing policies Originated policies Are those that are formulated by the top management As to level in the Organization Basic policies Formulated at the start of the business but may be amended to cope with changing conditions ...
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...Excellence in Financial Management Course 2: Financial Planning and Forecasting Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a basic understanding of how to prepare a financial plan (budgeted financial statements). This course will also discuss some of the problems associated with budgeting along with "best practices" in budgeting. This course is recommended for 2 hours of Continuing Professional Education. In order to receive credit, you will need to pass a multiple choice exam which is administered over the internet at www.exinfm.com/training Revised March 2000 Chapter 1 The First Steps Introduction Financial planning is a continuous process of directing and allocating financial resources to meet strategic goals and objectives. The output from financial planning takes the form of budgets. The most widely used form of budgets is Pro Forma or Budgeted Financial Statements. The foundation for Budgeted Financial Statements is Detail Budgets. Detail Budgets include sales forecasts, production forecasts, and other estimates in support of the Financial Plan. Collectively, all of these budgets are referred to as the Master Budget. We can also break financial planning down into planning for operations and planning for financing. Operating people focus on sales and production while financial planners are interested in how to finance the operations. Therefore, we can have an Operating Plan and a Financial Plan. However...
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...Budgeting (or profit planning) is a process or technique with broad applications in the management of a business, school or government agency. The rules apply to not-for-profits, as well. The process involves the formation of definite and specific plans or budgets for a limited future period, usually the ensuing fiscal or calendar year. These plans, which take into account all phases of the budgeted operations, are given expression in financial terms. They also become standards against which to measure and evaluate actual performance as the period progresses. Budgeting is, therefore, not only a short term planning and coordinating process, but is also a means of exerting management control over budgeted operations. Budgeting becomes a management process rather than a financial one. Budgeting, as Distinguished from Forecasting Forecasting and budgeting, despite their similarities, should be clearly distinguished from each other. A forecast is a prediction of likely future events. But, unlike a budget, a forecast is not a plan for achieving those forecasted (desired?) results. And a forecast is too general to serve as a control standard against which actual progress across the period can be measured. Forecasts are the starting point in the budget planning process. Most firms and public agencies precede the preparation of their operating budgets with revenue forecasts and expectations of economic conditions within their markets or constituencies, and in the world's...
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...INTRODUCTION Why is forecasting used? Forecasting can be conducted for many purposes, so it is important that the reason for performing the calculation is clearly defined and understood. Some common reasons for forecasting include: • Planning and Budgeting – Using forecast data can help network planners decide how much equipment to purchase and where to place it to ensure optimum management of traffic loads. • Evaluation – Forecasting can help management decide if decisions that have been made will be to the advantage or detriment of the company. • Verification – As new forecast data becomes available it is necessary to check whether new forecasts confirm the outcomes predicted by the old forecasts. Knowing the purpose of the forecast will help to answer additional questions such as the following: 1. What is being forecast? – events, trends, variables, technology 2. Level of focus – focus on a single product or a whole line, focus on a single company or the entire industry 3. How often is forecasting conducted? – daily, weekly, monthly, annually 4. Do the methods used reflect the decisions needed to be taken by management? 5. What are the resources available to make decisions? – Lead-time, staff, relevant data, budget, etc. 6. What are the types of errors that could occur and what will they cost the company? DECISION TO BE TAKEN FACTORS INFLUENCING FORECASTING: • Technology DESCRIPTION OF THE SOFTWARE Vanguard introduced its first product...
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...chapter 4 Financial Forecasting Author's Overview Developing pro forma statements is a fairly involved process. However, the rewards to students are high in terms of understanding the interaction of accounting data and financial forecasting. The development of pro forma financial statements is an integrative exercise, so there is little reward for a halfway approach. The percent-of-sales method, presented at the back of the chapter, is a second approach to financial forecasting. It has the virtue of being easily understood and quickly mastered, but it does not have the full validity of developing pro forma statements. It is really a matter of instructor preference. Chapter Concepts * Financial forecasting is essential to the strategic growth of the firm. * The three financial statements for forecasting are the pro forma income statement, the cash budget and the pro forma balance sheet. * The percent-of-sales method may also be used for forecasting on a less precise basis. * The various methods of forecasting enable the firm to determine the amount of new funds required in advance. * The process of forecasting forces the firm to consider seasonal and other effects on cash flow. Annotated Outline and Strategy I. Need for Financial Planning A. ...
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...Health Care Budget Virginia Ivins HCS/577 October 13, 2014 Robert Adams Health Care Budget Planning and budgeting helps ensure that operations are being carried out in a manner consistent with the mission and vision of the organization. There are several budgeting models that are effective. According to Louis C. Gapenski, (2008), “More detailed managerial guidance is contained in the operating plan, often called the five-year plan. The financial plan, which is the financial portion of the operating plan, contains a long-term plan, working capital management plan, and managerial accounting plan” (Gapenski, 2008). Good financial management processes for tracking resource utilization are essential for a department to make effective use of its resources. Not planning and budgeting properly can also lead to even bigger problems in the finances of an organization. Most effective financial management practices Effective financial planning and control helps each department in the organization keep track of its resources and hold each department accountable. Monitoring of expenditure is essential on a regular basis. The most effective financial management practices include variance analysis, benchmarking, environmental scanning, model development, forecasting, types of budgets, types of monitoring methods and frequency of monitoring. According to VarianceAnalysis.org, (2014), “Variance analysis is defined as the difference between the expected amount and the actual amount of...
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...UNIT-I Unit I: Nature of Financial Management: Meaning – Nature – Objectives – Scope- Functions of Financial Management – Financial forecasting – Financial Planning – Time Value of Money (NP) Nature of Financial Management: Meaning: Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise. Nature Scope/Elements 1. Investment decisions includes investment in fixed assets (called as capital budgeting).Investment in current assets are also a part of investment decisions called as working capital decisions. 2. Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby. 3. Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two: a. Dividend for shareholders- Dividend and the rate of it has to be decided. b. Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise. Get MBA study materials, articles, order business templates and stock market updates from or http://www.easymbaguide.in/ or www.easymbaguide.jimdo.com or www.easymbaguide.blogspot.com. Give your valuable feedback...
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...Sales & Operation Planning Adrian Rader American Public University Kristopher Bradshaw Sales & Operation Planning Sales and operation planning sets the foundation for any successful business. In order to succeed a company must be prepared from the beginning and set the groundwork or procedures it will follow. From customers to sales and marketing to developing, the sales and operations planning is designed to set up all the plans for every aspect of the business. The process in done is phases and tasks must be done before everyone can come together at the first meeting. Meetings must be set up well in advanced to allow everyone involved adequate time to prepare their part of the meeting. The process has been becoming more prevalent with businesses as they see the importance of this step. It is important early on that everyone knows their role. In the mid-1980s, Oliver Wright developed the sales and operations planning process. “He essentially recommended to his manufacturing clients that they get Sales plans from their Sales organizations to use as a basis for production planning” (Lapide, 2014). The tasks that must be done before the first meeting are simple. The people who should be part of the process need to know in order for them to prepare for the first meeting. The dates need to be set for first yearly meetings to allow for adequate preparations. If the company is going to use technology, the software must be tested to make sure the accuracy is correct...
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...1. Introduction: Leitax is a large digital camera manufacturer and it was the seventh largest player in the field of digital camera business in 2004. It is headquartered in Memphis, Tennesse, U.S.A and made a revenue of $423 million in 2002. Leitax was a subsidiary of Newplex, a $22 Billion print, imaging and a consumer electronics company. Leitax was started owing to the large boom period witnessed in the digital camera market in the early 2000’s. It was to become a company that focused on manufacturing and selling of digital cameras in the different geographical regions of the U.S and in the world namely Europe, Middle East and Africa (EMEA) and the Asia Pacific Region (APAC). Leitax was able to sell its cameras through retailers such as Best Buy, CompUSA and Circuit City in U.S.A , Carrefour in Latin America and other retailers in Europe and Asia. In addition to the respected Directors already employed, Leitax further employed Sales Directors to control operations in the Latin American and Canadian regions. Leitax maintained Distribution Centres (DC’s) in Little Rock & Arkansas in the U.S, Amsterdam-Holland in Europe and Hong Kong- China. Manufacturing was undertaken in the plants located in Mexico, Chile and China and then were shipped to the DC’s for resale to the retailers. Leitax on an average had produced and maintained eight camera models in its product portfolio that offered optical zoom, megapixel resolution and internal memory. These cameras were able to the...
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...Abstract Financial planning and budgeting has become a powerful tool of any company’s financial management. Planning and budgeting is an issue that should be solved in a complex. Therefore, this final English research paper highlights three main approaches absorbed: theoretical, practical, and analytical. Theoretical knowledge cannot be applied to practice without clear understanding of business, a feeling about the actual circumstances. Practical knowledge cannot be applied to professional tasks without analytical approach. This skills and approaches are presented and proven in this research. Having faced planning and budgeting process of middle-sized company, it has been noted that some issues of this important activity absence clarity, confidence, and flexibility. In order to optimize planning and budgeting process a thorough examination has been prepared in this research paper. The Company where experience has taken place is Levi’s XX that stands for Levi’s Vintage Clothing. Therefore, the industry examined is apparel, and as a market is taken the whole Globe. Table of Contents Abstract 2 Introduction 4 • The purpose of the study 4 • The main conceptual problem 5 Methodology 6 1. Essence and role of financial planning and budgeting 7 1.1 Planning and budgeting role in company’s structure 7 1.2 Purpose of budgeting 7 2. Company profile, industry and market description 10 2.1 Levi’s XX story 10 2.2 Company’s structure 10 3. Principles and objectives...
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...compliance with associated government regulation. What is Human Resource Planning? According to Brighthub.com, “Human Resource Planning” is a systematic analysis of HR needs to ensure the availability of the correct number of employees with the necessary skills at the right time. The increased competitive nature of business that makes workforce flexibility an imperative need has raised the importance of human resource planning. Effective Human Resource planning entitles five main steps. These steps include: 1. Demand Forecasting 2. Supply Forecasting 3. Audit 4. Reconciliation Or Affecting A Demand-Supply Fit 5. Control. Demand Forecasting This is a process of determining future needs for Human Resource in terms of quantity and quality. It is done to meet the future personnel requirements of the organization to achieve the desired level of output. Demand Forecasting requires a good understanding of the internal and external environment of the enterprise. Short-term and long-term organizational plans and strategies are the major aspects of the internal environment that affect HR Planning, while on the other hand, the general status of the economy, developments in technology, level of competition, labor market trends and regulations, demographic trends are the major aspects of an enterprise’s external environment that impacts HR planning. There are two main methods of forecasting. These include: Delphi technique/ managerial estimates, and various mathematical...
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