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Finances, Financial Planning, Strategic Planning and Financial Statements

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Assistance needed with finding background information on these financial questions. Please include in-text citations and references used. Thank you!

1. Fixed vs variable costs - What are the basic differences between fixed and variable expenses and how do you consider these in a financial plan?
2. Financial planning - How are investment decisions related to financing decisions?
3. Investment and financing decisions - Identify the steps in the financial planning process
4. Pro forma financial statements - What are pro forma financial statements and why are they important part of the financial planning process?
5. Strategic planning - Explain why strategic planning is the most crucial planning step.
6. Financing plan - Explain why financing plan sets for the ways in which the capital projects will be financed for a firm.

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Step 1
The basic difference between fixed costs and variable costs is that variable costs vary with the level of activity or the number of units produced. Fixed costs on the other hand do not change with the number of units produced. For example, direct materials is an example of variable cost, however, the rent paid for the factory is a fixed cost. In a financial plan if an objective is set for production, the units of product made will determine the variable costs (a). The production objective will not affect the fixed cost. With higher variable costs the working capital required will increase. The financial plan must provide for working capital according to the variable cost.

Step 2
Investment decisions are related to financing decisions. Financing decisions are related to the source of finance such as bank OD, bonds, and equity. Investment decision is related to how money is invested by the business. Is it invested in expansion projects, modernization projects, or working capital? If the ...

Solution Summary

Answers questions about finance, fixed vs variable costs, financial planning, investment decisions, complete with references.

See Also This Related BrainMass Solution

Pro forma Financial Statements

I need to complete a set of proforma financial statements using the attached mini case study. I also need to answer a few questions about the financial statement. I will attach the case study in adobe. It begins on pg 99 and is about a company Home Safety Inc. the finacial statements need to be done in Microsoft excel. I will also provide some check figures that my teacher provided below.

Mini-Case Study: Home Safety, Inc

2003 est
Net Income $8,230
Total Assets $98,988
Total Liabilities $48,910
Cashflow from Operating Activities ($17,323)
Cashflow from Investing Activities ($15,998)
Cashflow from Financing Activities $33,736

These are the four questions that need to be answered.

1) How much revenue growth is needed to achieve the desired profitability?

2) Based on your review of the pro forma financial statements, what general observations and recommendations can you make?

3) Do you believe that these pro forma statements will meet the company's overall goals and objectives? Why or why not?

4) What other assumptions and considerations are necessary for this plan to work?

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