The First part: What is the financial planning model and what is involved in it?
--Second the percentage of sales approach to financial planning.
--Third Growth rates and financial planning
--Lastly what are the pros and cons of financial planning models.
The First part:
What is the financial planning model and what is involved in it?
Financial plan, budgeting and forecasting is one of the important components of the business plan and success of the business. This consists of details of raising and allocation of financial resources in an efficient and effective manner. The major features are:
? Will help maximize efficiency and minimize waste.
? To facilitate management and control.
? Effectiveness and efficiency of operations include the use of the entity's resources.
? Help in strategy implementation
Financial planning model include task of preparing a set of projections is the construction of a mathematical model to reflect the finances and activities of a business. Sales minus Costs equals Profits (i.e. S - C = P expressed as a formula) is an example of a very simple model for deriving projected profits from assumptions about future sales and costs.
http://www.planware.org/financialprojections.htm as retrieved on 27 Jan 2008 04:13:31 GMT.
They can be much more complex as they must accommodate multiple time periods (months, quarters and years) and handle hundreds of variables relating to sales, costs etc. Components of the process:
1. Information capture Financial analysts need to collect information, whether it's from internal sources (such as sales data) or external sources (such as data from distribution partners).
2. Information aggregation You need to aggregate the captured information to support the forecast.
3. Analysis Using different analytical techniques, you ...
The pros and cons of financial planning models are specified.