This document provides an overview of financial policy and strategic planning. It discusses strategic planning processes, objectives and goals. It also covers corporate planning, financial planning, and financial models. Specifically, it defines strategic planning and discusses the strategic planning process. It outlines objectives of strategic planning including financial, internal, customer, and learning/growth objectives. It also defines corporate planning and financial planning, outlining types of financial plans. The document then discusses financial models, their uses, limitations, development process, and types including three statement, LBO, consolidation, IPO, budget, and forecast models. It concludes by covering applications of financial modeling in fields like investment banking, project finance, and corporate finance.

1. UNIT 1
FINANCIAL POLICY AND STRATEGIC PLANNING

2. CONTENTS:
• Strategic Planning –Strategic Planning Process – Objectives and Goals – Major
Kinds of Strategies and Policies.
• Corporate Planning – Process of Financial Planning – Types of Financial Plan.
• Financial Models – Tools or Techniques of Financial Modelling – Uses and
Limitations of Financial Modelling – Applications of Financial Models – Types of
Financial Models - Process of Financial Model Development.

3. Definition
The term ―strategy‖ (which is derived from the Greek word
strategies, meaning “general” )has been used in different
ways. Authors differ in at least one major aspect about
strategies. Some writers focus on both the end points
(purpose, mission, goals, objectives) and the means of
achieving them (policies and plans). Others emphasize the
means to the ends in the strategic process rather than the
ends per se. Policies are general statements or
understandings which guide managers thinking in decision
making. They ensure that decisions fall within certain
boundaries. They usually do not require action but are
intended to guide managers in their commitment to the
decision they ultimately make.

4. STRATEGIC PLANNING
Strategic planning is a process in which organizational leaders determine their vision for the future as well as identify their goals
and objectives for the organization.
STRATEGIC PLANNING PROCESS
The simplified strategic planning process in four steps.
1. Part one: How did we get to where we are now?
2. Part two: Where do we want to go? What is our vision of success?
3. Part three: What is going to get in our way? What do we need to be aware of?
4. Part four: What do we need to get there?
OR
Gather Inputs Vision Mission Values
Competition,
Risks and
Road Blocks
Strategic
Priorities,
goal strategies
and tactics
Communication

6. OBJECTIVES AND GOALS OF STRATEGIC
PLANNING
FINANCIAL OBJECTIVES
• Increase revenue
• Maintain profitability
• Grow shareholder value
• Ensure favorable bond ratings
• Ensure financial stability
INTERNAL OBJECTIVES
• Grow sales percentage for new products.
• Decrease employee turnover rate.
• Improve customer service and relationships.
• Invest in total quality management.
• Reduce a certain amount of cost annually.
• Streamline core business processes.
CUSTOMER OBJECTIVES
• Offer the best value for money.
• Cross-sell more products.
• Provide the best service.
• Increase market share.
• Expand product offerings.
LEARNING AND GROWTH OBJECTIVES
• Tactical knowledge.
• Improve staff productivity.
• Build a performance-focused culture.
• Invest in productivity tools.
• Maintain alignment across the organization.

7. MAJOR KINDS OF STRATEGIES AND POLICIES
1. Corporate-Level Strategy:
The set of strategic alternatives that an organization from as it manages its operations simultaneously across several industries
and several markets.
2. Business Level Strategy:
How the organization conducts business in a particular industry.
3. Functional Level Strategy:
The strategy was developed for specific functional areas such as marketing, finance, and so forth
CORPORATE PLANNING
Corporate planning is a process that is used by businesses to map out a course of action to grow, increase profits, gain exposure,
or strengthen brand identity. Corporate planning is a tool that successful business users to leverage their resources more wisely
than their competitors.
FINANCIAL PLANNING
Financial Planning is the process of estimating the capital required and determining its competition. It is the process of framing
financial policies in relation to procurement, investment, and administration of funds of an enterprise.
Corporate
Level
Business Level
Functional Level

12. OBJECTIVES OF FINANCIAL PLANNING
Financial Planning has got many objectives to look forward to:
a. Determining capital requirements
b. Determining capital structure
c. ensures that the scarce financial resources are maximally utilized in the best possible manner
d. Framing financial policies
FINANCIAL PLANNING PROCESS
There are six stages to develop a financial plan and to carry out personal money management.
1) Identify your Financial Situation Determine Financial Goals
3) Identify Alternatives for Investment
4) Evaluate Alternatives
5) Put Together a Financial Plan and Implement
6) Review, Re-evaluate and Monitor the Plan

13. TYPES OF FINANCIAL PLANNING
1. Cash flow planning: Cash flow planning is a process where individuals calculate their present and future expenditures
and strategize accordingly to achieve their financial goals.
2. Tax planning: Tax minimization and proper tax-planning should be everyone’s priority if one wants to expand his/her
wealth. You can invest in various tax-saving instruments to minimize your taxable income.
3. Investment planning: Investment Planning is a process of identifying one’s goals in life and correspondingly
prioritizing them.
4. Insurance planning: This is one of the most important aspects of financial planning because most of the problems in
life come unannounced.
5. Real estate planning: Real Estate Investment has long been considered as a low-risk investment with high returns
6. Retirement planning: Every individual aspires to have a peaceful retirement without worrying about his/her finances.

14. FINANCIAL MODELS
• A financial model represents
 The financial performance of a company
 For both past and future.
• Always advisable to build financial models in excels
• Skills sets required by an individual to build a financial model
 Knowledge of excel
 Knowledge of accounting
 Knowledge of corporate finance
 Understanding the company operations
USES OF FINANCIAL MODELLING:
• In the finance industry, modeling is increasing rapidly.
• Financial modeling acts as an important tool that enables business ideas and risks to be estimated in a cost-effective
way.
• Financial modeling is an act of creating an attractive representation of the financial situation of the company.
• Financial Models are mathematical terms aimed at representing the economic performance of a business entity.

15. FINANCIAL MODELING LIMITATIONS
(1) The heavy use of assumptions about the future
(2) The heavy reliance on a terminal value that makes up so much of the net present value of a business
(3) The reliance on the weighted average cost of capital (WACC)
(4) The propensity of excel models to contain errors that cannot be easily found
(5) The inability to reliably predict what is going to happen in the future.
FINANCIAL MODELING PROCESS
We have broadly divided this process into 7 steps –
1. The entry of Historical Financial Data
2. Analysis of Historical Performance
3. Gathering of Assumptions for Forecasting
4. Forecast the Three Statement Model
5. Future Business Risk Assessment
6. Performance of Sensitivity Analysis
7. Stress Testing of the Forecast

16. FINANCIAL MODELING TOOLS
Financial modeling tools are the set of information or skills or any other factor element which helps an
analyst to evaluate the value of a company or a business segment or to evaluate the viability of the project.

17. TYPES OF FINANCIAL MODELS
1. Three statement model: This is one of the more basic, standard forms of financial modeling. The goal of this
model is to help a business understand how their three financial statements – the income statement, balance
statement, and cash flow statement) are linked.
2. Leveraged buyout (LBO) model: This is a more advanced, complicated financial model. As the name
suggests, it’s a model used when a company is buying out another company and using a significant amount of
funding to complete the purchase.
3. Consolidation model: This type of model includes multiple business units added into one single model. Each
business unit has its own set of financial data that’s consolidated against the other business units to create a
single worksheet.
4. Initial Public Offering (IPO) model: This model looks at comparable companies and works to analyze how
much investors will be willing to pay for shares in the organization before going to sell shares.
5. Budget model: Budget models are typically designed to be based on monthly or quarterly figures and are a
primary focus on the income statement of a business.
6. Forecast model: The forecast and budget models are often conducted around the same time and sometimes
combined for a better understanding of the overall predicted financial position of a company.

18. APPLICATIONS
• Investment Banking / Equity Research: Financial Modeling is the basic tool for fundamental
analysis and valuations. Investment bankers use it to arrive at a valuation in M&A or fundraising
transactions. Equity Analysts use it to value stocks and come up with buy/sell/hold
recommendations.
• Project Finance/Credit Rating: Financial models help bankers, credit analysts to project future
revenues and costs and to make an informed judgment about the viability of a project. They are then
able to decide if they should extend loans or what the credit rating of a project or company should
be.
• Corporate Finance: Financial Modeling is used by companies to assess their own finances and
projects. It is hence an input in creating funding plans for corporate projects.
• Entrepreneurs/Private Equity: Entrepreneurs use Financial Models to present their plans to
potential investors as much as to plan their strategies. Running different simulations can often be an
important tool in avoiding potential risks

19. Thank You