LEARNING OUTCOME 2

Unit 7007 Learning Outcome 2

Unit 7007 Learning Outcome 2

2.1 Components of Financial Plan

Financial planning, in general, the work of the mind the theme of the arrangements contemplated by the human in the present in order to face the conditions for future; The aim of planning in its outcomes in order to subjugate the future of the human person, and to the reduction of uncertainty surrounding this future, as well as to reduce the factors of coincidences and risk in the formation of life by the looks of it rights. And consider business planning as a management process provides for the institution establishes the goals of a future for her work in light of the resources available to them, and in light of its assessment of the ordinary political, economic and social conditions in the environment where they are present and can affect performance, and includes an action plan for implementation of the objectives set (Brigham, 2010, p. 113). The advantages of planning, many received idea is widely accepted in all walks of life including business, industrial and service enterprises, in order to understand all of the importance of planning in the process of making decisions on future plans and routes to be used institutions in the future direction, this has been said that the institution does not plan for their future may not have a future (Horne & Wachowicz, 2000, p. 333).

In the organization Primodial UK the most important component of financial plan is the sales forecast. Sales forecasting helps to plan the other components of financial plan. Almost all financial plans require a sales forecast obtained externally. The sales forecast will be provided frequently as the rate of sales growth, rather than as an explicit dollar amount of sales. These two approaches are essentially the same, since one can calculate the projected sales once they know their growth rate. It is true that you cannot have perfect sales forecasts, as sales depend on the future state, uncertain economy (Titman et al, 2010, p. 87). To help a company to make such projections, there are companies that specialize in the development of macroeconomic and industry forecasts. Cash flow estimation is the second important component of the plan. The financial plan will include a section on financial arrangements. This part of the plan should consider the dividend policy and debt. Sometimes, companies expect to get cash by selling new shares or arranging loans. In this case, the plan should take into account the types of financial instruments will be sold and which methods are most appropriate emission. The third important is the asset requirements needed by the business. The plan will describe projected capital spending. At a minimum, the projected balance sheet will contain the changes in total assets and net working capital. These changes are indeed the total capital budget of the company (Umapathy, 2007, p. 79). Therefore, the proposed capital expenditure in different areas must be reconciled with overall increases in the plan long ...