Download pdf - 22173099 Financial Plans and Policies

7/23/2019 22173099 Financial Plans and Policies

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Presented by

Jagannath Pati


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FINANCIAL PLAN A financial plan is a statement estimating the amount of

capital requirements and determining its composition.

It emphasizes on the following aspects- How much fund is require ?

When the fund is require ?

How the fund should be raised ?

How to use the funds ?


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DEI!I"I#!According to $ohen and %obbins inancial planning should &

'. Determine the financial resources require to meet the compan()s operatingprogramme.

*. orecast the e+tent to which these requirements will be met b( internalgeneration of funds and the e+tent to which the( will be met from e+ternalsources.

,. Deelop the best plans to obtain the required e+ternal funds.

. Establish and maintain a s(stem of financial control goerning the

allocation and use of funds./. ormulate programmes to proide the most effectie profit-olume-costrelationship.

0. Anal(se the financial results of operations

1. %eport facts to the top management and ma2e recommendations on futureoperations of the firm


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#34E$"I5E6 # I!A!$IA7 87A!Adequate unds

le+ibilit(

7ong-term 5iew7iquidit(

#ptimum use

Econom(


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$HA%A$"E%I6"I$698%I!$I87E6 # A

6#:!D I!A!$IA7 87A!6implicit(

3ased on clear-cut #b;ecties

7ess Dependence on #utside 6ourcesle+ibilit(

6olenc( and 7iquidit(

$ost8rofitabilit(


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6"E86 I! I!A!$IA7

87A!!I!=Establishing inancial #b;ecties

ormulating inancial 8olicies

ormulating 8rocedures8roiding for fle+ibilit(


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Internal actors

a!ature of 3usiness

b6ize of 3usiness

c Actiities :nderta2en b( the Enterprise or 6cope of 3usiness

d8roduction "echniques

e


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E+ternal actorsa International conditions and Economic #utloo2

b 8opulation "rends and its composition

c 6hift in consumer 8references

d $ompetitie factors

e 6hift in technolog(

f =oernment %egulations


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DIE%E!$E 3E"WEE! 87A!

A!D 8#7I$A plan is aset out of actions t(at *ill be

undertaen to a(iee a goal. Plans giediretion to ations and ensure t(at all ationsare moing to*ards stated goals.

A poli' is a set of guiding principles or rules

*(i( is framedto in7uene deisions andations in implementation of plan t(at re7etst(e ultimate be(aior of t(e organi"ation.


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I!A!$IA7 8#7I$IE6Defnition :

Criteria desribing a orporation8s (oiesregarding its debt,equit' mix& apitalstruture& met(od of 9naning inestmentpro:ets& and (edging deisions *it( a goal ofmaximi"ing t(e alue of t(e 9rm to some setof sto(olders.


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"he inancial policies of a corporate mainl( are related to the

following issues &

'. 6ources of inance

*. $apital 6tructure decision

,. $apital 3udgeting

. Diidend Decision

/. Wor2ing $apital


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6#:%$E6 # I!A!$E

1. Internal +oure

Past Aumulated Pro9t

Proisions

2. External +oure i;!*ners(ip Capital

Equit' +(ares

Preferene +(ares

ii;5orro*ed Capital


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$#6" # %AI6I!= :!D9$A8I"A7=(e ost of apital means ost of obtainingfunds.

A deision to inest in a partiular pro:et

depend upon t(e ost of apital of t(e 9rm ort(e ut o> rate *(i( is minimum rate ofreturn expeted b' t(e inestors.

It a>ets t(e maret prie of t(e s(ares of t(e9rm.

?ig(er t(e ris inoled in a 9rm& (ig(er t(eost of apital.


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$A8I"A7 6"%:$":%E%efers to the 2inds of securities and its composition and

proportion.

"he capital structure ma( be in following forms &a Equit( shares onl(>

bEquit( shares and 8reference 6hares>

c Equit( shares and Debentures>

dEquit( shares and 8reference 6hares and Debentures


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$A8I"A7 3:D=E"I!=$apital 3udgeting is the process of ma2ing inestment decisionin capital e+penditures.

Its ob;ecties is to increase the profitabilit(> that can be achieedb( the following &

a Increasing reenue b %educing cost"here are arious methods are used for capital budgeting &

a 8a( 3ac2 8eriod


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FAC=!R+ INFL@ENCIN) CAPI=AL

5@


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DI5IDE!D DE$I6I#!


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DE"E% as per

$ompanies Act>'/0*.


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='pes of diidend poli'+table diidend poli'

Regular diidend poli'

Irregular diidend poli'

No diidend poli'


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Wor2ing $apital 8a(ment of

wages and other da( to da( e+penses etc.

"(pes &

'.8ermanent or i+ed Wor2ing $apital

*."emporar( or 5ariable Wor2ing $apital

Determinants of Wor2ing $apital

- 6ame as 6lide ', -


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I!A!$IA7 %E8#%"I!=Finanial Reporting is not(ing but t(e

presentation of 9nanial fats relating to t(eperformanes and atiities of t(e enterprise.

-et(ods of ReportingB

1. !ral

2. 0ritten

#. )rap(iReporting is made as per t(e leel of

management.


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LEEL+ !F -ANA)E-EN=

Reporting


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.

=(e Annual Finanial Reporting is made as perfollo*ing guidelines

Reporting of 5aning CompaniesDDDR5I

Reporting of Insurane Companies DDDIR


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FINANCIAL ANAL+I+Finanial Anal'sis is ealuation and

interpretation of 9nanial data and reports9nding out t(e results t(ereof.

It sa's about t(e problems and its reasons& ont(e basis of *(i( orretie ations aretaen.

It inludes Ratio anal'sis& Funds 7o*+tatements& Cas( Flo* +tatements&Comparatie +tatements& +tandard Costingand arianes& 5udgetar' Control et.


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