This document discusses financial planning and forecasting. It defines financial planning as a systematic process of determining financial objectives, policies, and procedures related to a firm's estimated financial requirements and financing patterns. Financial forecasting is described as using past financial statements, funds flow statements, ratios, and industry economic conditions to project a firm's future financial condition. Key aspects of financial planning and forecasting include determining objectives, formulating policies, developing procedures, assessing factors that influence financing decisions, and creating pro forma financial statements and cash budgets to estimate future needs and performance.

1. DR. RICHA SINGHAL
ASSOCIATE PROFESSOR
DEPT. OF EAFM
S.S.JAIN SUBODH PG COLLEGE

2. PLANNING IS A SYSTEMATIC WAY OF DECIDING ABOUT DOING
THINGS IN A PURPOSEFUL MANNER. WHEN THIS APPROACH IS
APPLIED EXCLUSIVELY FOR FINANCIAL MATTER, IT IS TERMED
AS FINANCIAL PLANNING.
In other words, In connection with any business enterprise.,
Financial planning refers to the process of estimating a firm's
financial requirements and determining pattern of financing. It
includes determining the objectives, policies, procedures and
programmes to deal with financial activities.
Thus, financial planning involves:
1. Determining Financial Objectives
2. Formulating Financial Policies
3. Developing Financial Procedures

3.  NATURE OF A BUSINESS
 INCOME OF BUSINESS
 RISK IN A BUSINESS
 PLANS OF EXPANSION
 STATUS AND SIZE OF A BUSINESS
 ATTITUDE OF OWNERS
 GOVERNMENT CONTROL
 ALTERNATIVE SOURCES OF FINANCE
 CAPITAL STRUCTURE OF HIGH GRADE
SECURITIES
 MAGNITUDE OF EXTERNAL CAPITAL
REQUIREMENT

4.  SIMPLICITY
 FLEXIBILITY
 FORESIGHTEDNESS
 LIQUIDITY
 USEFUL
 COMPLETENESS
 ECONOMICAL
 COMMUNICATION
 IMPLEMENTATION
 CONTROL
 LESS RISKS DEFINE CLEAR-CUT OBJECTIVES
 PROFITABILITY
 TIMING
 LESS DEPENDENCE ON OUTSIDE SOURCES

5.  SUCCESSFUL PROMOTION OF A BUSINESS
 EFFICIENT DIRECTION OF A BUSINESS
 EXPANSION AND DEVELOPMENT OF A BUSINESS
 ECONOMY AND CO-ORDINATION IN OPERATING
ACTIVITIES
 AVAILABILITY OF ECONOMIC CAPITAL
 ADEQUATE LIQUIDITY IN BUSINESS
 SECURITY OF CAPITAL
 ADEQUATE RETURN ON CAPITAL EMPLOYED
 CHANGES IN PRICE LEVEL

6. FINANCIAL FORECASTING IS THAT
PROCESS IN WHICH THE FUTURE
FINANCIAL CONDITION OF THE FIRM
IS SHOWN ON THE BASIS OF PAST
ACCOUNTS, FUNDS FLOW
STATEMENTS, FINANCIAL RATIOS
AND ECONOMIC CONDITIONS OF
THE FIRM AND INDUSTRY.

7.  It is a Part of Planning process.
 They are inferences as to what the future may be.
 Extends over a time horizon.
 Based on: Economic assumptions (interest rate, inflation rate, growth rate and so on).
 Sales forecast.
 Pro forma statements of Income account and Balance sheet.
 Asset requirements.
 Financing plan.
 Cash Budget

8.  OPTIMUM UTILISATION OF CASH BALANCES
 PERFORMANCE EVALUATION
 ESTIMATION OF FUTURE FINANCIAL NEEDS
 AGREEMENTS WITH SUPPLIERS OF FINANCE
 STUDY OF FINANCIAL FEASIBILITY

9. PROFORMA OR PROJECTED INCOME STATEMENTS- This statement is right estimation of
future income, cost, profit, taxes and other financial interests which is prepared on the basis of
forecasting sale.
PROFORMA OR PROJECTED BALANCE SHEET- Proforma balance sheet is forecasting of flow
of funds and according to the estimation of every item should be made and checked. The
preparation of proforma balance sheet is made on the basis of proforma income statement
and supporting schedules and budgets.
CASH BUDGET OR ACSH FLOW FORECAST- A Cash Budget is a forecast of how much cash will
be required during a specific period in future. Therefore, expected cash receipts and expected
cash payments are estimated by preparing this budget. However, the estimates are prepared for
weeks or months depending upon the requirement of cash.