Financial Planning and Forecasting

MBA Business Finance Management Dissertation Ideas, Economics Projects Topics Thesis Ideas and Abstracts in PDF, DOC, PPT

Financial Planning and Forecasting

Postby Anup V » Tue Aug 07, 2012 11:06 pm

Financial Planning and Forecasting is the estimation of value of a variable or set of variables at some future point. A Forecasting exercise is usually carried out in order to provide an aid to decision – making and planning in the future. Business Forecasting is an estimate or prediction of future developments in business such as Sales, Expenditures and profits. Given the wide swings in economic activity and the drastic effects these fluctuations can have on profit margins, business forecasting has emerged as one of the most important aspects of corporate planning. Forecasting has become an invaluable tool for business to anticipate economic trends and prepare themselves either to benefit from or to counteract them. Good business forecasts can help business owners and managers adapt to a changing economy.

Financial planning and forecasting represents a blueprint of what a firm proposes to do in the future. So, naturally planning over such horizon tends to be fairly in aggregative terms. While there are considerable variations in the scope, degree of formality and level of sophistication in financial planning across firms, we need to focus on common elements which include Economic assumptions, Sales forecast, Pro forma statements, Asset requirements and the mode of financing the investments.
In general usage, a financial plan can be a budget, a plan for spending and saving future income. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan can also be an investment plan, which allocates savings to various assets or projects expected to produce future income, such as a new business or product line, shares in an existing business, or real estate.

Financial forecast or financial plan can also refer to an annual projection of income and expenses for a company, division or department. A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company.

Objectives of the Study

The main objective of the study is to understand the financial position of the company, refers to the development of long-term strategic financial plans that guide the preparation of short-term operating plans and budgets, which focus on analyzing the pro forma statements and preparing the cash budget.

Financial Forecast

Financial forecast or financial plan can also refer to an annual projection of income and expenses for a company, division or department. A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company.

While a financial plan refers to estimating future income, expenses and assets, a financing plan or finance plan usually refers to the means by which cash will be acquired to cover future expenses, for instance through earning, borrowing or using saved cash.

Corporations use forecasting to do financial planning, which includes an assessment of their future financial needs. Forecasting is also used by outsiders to value companies and their securities. This is the aggregative perspective of the whole firm, rather than looking at individual projects. Growth is a key theme behind financial forecasting, so growth should not be the underlying goal of corporation – creating shareholder value is enabled through corporate growth.
Anup V
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