BSBA Financial projections and budgets

1. FINANCIAL
PROJECTIONS
AND BUDGETS
Module 4:

2.  STRATEGIC PLAN
Is the grand plan of any
organization wherein the overall
objectives are set and specific
program are created in support of
the objectives.

3. ELEMENTS OF STRATEGIC PLAN
1. Vision Statement – is a description of what the
organization aspires to be in the long term.
2. Mission Statement – is the statement of the
organization’s core purpose. It provides direction
to the whole organization.
3. Corporate Objectives – these statements which
outline the specific goals, in line with the
mission, that an organization would like to
achieve.

4. 4. Corporate Strategies – are the concrete programs for
specific business units, departments, and cross-
functional areas. The corporate strategies have to be
aligned with the mission-vision and the must all be
aimed at achieving the corporate objectives.
5. Departmental Plans and Programs – are synonymous
with operational plans. Departmental plans are specific
in terms of activities, the time lines, the targets, and the
budget per activity.
6. Financial Forecasts and Budgets – the financial
forecast and budgets tie everything together.
Department plans and programs, specific targets, and
forecasts are forecasts are made based on corporate
objectives.

5. STRENGTHS, WEAKNESSES,
OPPORTUNITIES, THREATS
One of the way through witch
managers can quickly assess the
situation of the company and make the
necessary plan of action is doing a
SWOT analysis.

6.  Strength – is a resource that is owned or controlled by or is
available to a firm. Strength will give a firm an advantage
over its competitors.
 Weaknesses – is a limitation which affects a firm’s position
relative to its competitors. Weaknesses may affect the way
the firm delivers products and services to customers.
 Opportunity – is a situation in the external environment
which the firm can take advantage of.
 Threat – is an unfavorable situation in firm’s external
environment which may adversely affect the way a firm
does business.
*SWOT stand for STRENGTHS, WEAKNESSESS,
OPPORTUNITIES, and THREATS.

7.  Financial Forecast
 Every strategic plan is culminated by the preparation of a
financial plan. Financial plans include forecasts.
*Sale forecast – is a projection of sales of a product or service
expressed either in units or absolute monetary value.
Factors that may affect future sale performance
 Inflation rate ( which affects the purchasing power of
consumers, thus also affecting buying behavior and spending
patterns)
 Trends in the market
 Investment climate ( when the economy is conductive for
investing, consumers tend to buy less of consumer products)

8.  PROJECTED FINANCIAL STATEMENTS
 is a financial projection that presents an
entity’s expected financial positions, results
of operations, and cash flows.

9. FACTORS OF PREPARING PROJECTED
FINANCIAL STATEMENTS
1. Market conditions – these include inflation,
competitiveness of specific industries, growth,
global markets, consumer demand, and spending
patterns of specific market segments.
2. Economy – this is taken into account if the
economy is thriving, plateauing, or slowing
down.
3. Investment climate – investors in securities and
other financial or investment products always try
to see whether the economy is bullish or bearish.

10. 4. Competitive position of the firm in the
industry – whether a company is market leader, a
nicher (a firm whose marketing strategy is to focus
on a smaller market segment), or a challenger is a
huge determinant of sales, investments to be made,
and other expenses to be incurred in support of
operations.
5. SWOT – this is an analysis of the company’s
strengths and weaknesses, matched with the
opportunities and threats in its external
environment.

11. Projected Income Statement

12. Projected Balance Sheet

13. Projected Cash Flow

14. Budget
Is a statement of projected sales, expenses,
income, and other financial transactions for
the coming period. It is a firm’s financial
plan. A budget serves two major purposes:
 A tool for planning
 A tool for control

15. Types of budget
Operating budget – is a detailed
projection of income and expenses for a
given period of time, which is usually one
year.
Financial budget – shows the impact of
the planned operations and capital
investments on a firm’s assets, liabilities,
and owner’s equity.

16. OPERATING BUDGET
 Sale budget
 Production budget
 Direct materials budget
 Direct labor budget
 Factory overhead budget
 Selling and administrative expense budget
 Income statement
Financial Budget
Cash budget
Balance sheet

17. PREPARING THE BUDGET
1. Preparation of a sales forecast
2. Determining production volume in
support of the sales forecasts
3. Estimating cash flow
4. Preparation of financial statements

18.  SALE BUDGET
-Indicates the number of units a firm expects
to sell. That number of units is multiplied by the
selling price. The sale budget is the determinant
of all the other budgets included in the master
budget.

20.  Production budget
The production budget is simply:
Expected Desired
Production = Planned Sales + Ending - Beginning Inventory
Volume Inventory

21.  Direct Material Budget

22.  Direct Labor Budget

23.  Factory Overhead Budget

24.  Ending Inventory Budget

25.  Selling and Administration Budget

26.  Cash Budget