COLLEGE OF BUSINESS AND

MANAGEMENT
COURSE MODULE IN

SPECIAL TOPICS
IN FINANCIAL
MANAGEMENT
COURSE FACILITATOR: ARMALYN S. CANGQUE, MBA
FB/MESSENGER: Armalyn Segura Cangque
Email: [email protected]
Phone No: 09457243875

MODULE
 MISSION

Northern Negros State College of Science and technology envisions a skillful and productive

manpower, qualified and competent professionals endowed with leadership qualities, commitment to

public service, a common shared values, and capacities to integrate and use new knowledge and skills in

various vocations and professions to meet the challenges of the new millennium.

VISION

To train and develop semi-skilled manpower, middle level professionals and competent and

qualified leaders in the various professions responsive to the needs and requirements of the service areas

providing appropriate and relevant curricular programs and offerings, research projects and

entrepreneurial activities, extension services and develop progressive leadership to effect socio-economic

change and thereby improve the quality of life.

INSTITUTIONAL OUTCOMES

1. Demonstrate logical thinking, critical judgment and independent decision-making on any

confronting situations
2. Demonstrate necessary knowledge, skills and desirable attitudes expected of one’s educational
level and field of discipline
3. Exhibit necessary knowledge, skills and desirable attitudes in research
4. Exhibit proactive and collaborative attributes in diverse fields
5. Manifest abilities and willingness to work well with others either in the practice of one’s profession
or community involvement without compromising legal and ethical responsibilities and
accountabilities.
PROGRAM LEARNING OUTCOMES (CMO #75 s.2017)

The program shall produce a graduate who can:

1. Articulate and discuss the latest developments in the specific field of practice.
2. Effectively communicate orally and in writing using both English and Filipino.
3. Work effectively and independently in multi-disciplinary and multi-cultural teams.
4. Act in recognition of professional, social and ethical responsibility.
5. Preserve and promote “Filipino historical and cultural heritage”.
6. Perform the basic functions of management such as planning, organizing, staffing, directing and
controlling.
7. Apply the basic concepts that underlie each of the functional areas of business (marketing, finance,
human resource management, production and operations management, information technology,
and strategic management) and employ these concepts in various business situations.
8. Select the proper decision-making tools to critically, analytically and creatively solve problems and
drive results.
9. Express oneself clearly and communicate effectively with stakeholders both in oral and written
forms.
10. Apply information and communication technology (ICT) skills as required by the business
environment.
11. Work effectively with other stakeholders and manage conflict in the workplace.
12. Plan and implement business related activities.
13. Demonstrate corporate citizenship and social responsibility.
14. Exercise high personal moral and ethical standards.
15. Analyse the business environment for strategic decision.
16. Prepare operational plans.
17. Innovate business ideas based on emerging industries.
18. Manage a strategic business unit for economic sustainability.
19. Conduct business research.
20. Apply current and relevant practices and trends in the business environment.
21. Conceptualize, utilize and commercialize business research outputs.
22. Demonstrate social responsiveness to the needs of the community in the field of business and
management.
Warm greetings!

Welcome to the second semester of School Year 2020-2021! Welcome to the College of Business and
Management and welcome to NONESCOST!

Despite of all the happenings around us, there is still so much to be thankful for and one of these is the
opportunity to continue learning.

You are right now browsing your course module in BAPF106. As you read on, you will have an overview of
the course, the content, requirements and other related information regarding the course. The module is
made up of 2 lessons. Each lesson has seven parts:

INTRODUCTION- Overview of the lesson

LEARNING OUTCOMES- Lesson objectives for you to ponder on

MOTIVATION- Fuels you to go on

PRESENTATION- A smooth transition to the lesson

TEACHING POINTS- Collection of ideas that you must discover

LEARNING ACTIVITIES – To measure your learnings in the lesson where you wandered

ASSESSMENT – To test your understanding in the lesson you discovered

Please read your modules and learn the concepts by heart. It would help you prepare to be effective and
efficient professional in your respective fields. You can explore more of the concepts by reading the
references and the supplementary readings.

I encourage you to get in touch with me in case you may encounter problems while studying your modules.
Keep a constant and open communication. Use your real names in your FB accounts or messenger so I can
recognize you based on the list of officially enrolled students in the course. I would be very glad to assist
you in your journey. Furthermore, I would also suggest that you build a workgroup among your classmates.
Participate actively in our discussion board or online discussion if possible and submit your
outputs/requirements on time. You may submit them online through email and messenger. You can also
submit hard copies. Place them in short size bond paper inside a short plastic envelop with your names and
submit them in designated pick up areas.

I hope that you will find this course interesting and fun. I hope to know more of your experiences, insights,
challenges and difficulties in learning as we go along this course. I am very positive that we will successfully
meet the objectives of the course.

May you continue to find inspiration to become a great professional. Keep safe and God bless!

Course Outline in BAPF106 – SPECIAL TOPICS IN FINANCIAL MANAGEMENT

Course BAPF106
Number
Course Title SPECIAL TOPICS IN FINANCIAL MANAGEMENT
Course
Description A 3-unit course that will introduce strategy as a discipline and the frameworks used to
conduct strategic analysis. The purpose of this course is to introduce to students the tools,
techniques, and frameworks commonly used as part of market and industry assessments,
on engagements involving substantial operational and organizational analysis. This course
highlights the principal financial analytical tools used to conduct strategic analysis and
indicates the link between corporate strategy and performance through measurement
frameworks used frequently to provide decision making information to management.

No. of Units 3 units

Pre-requisites None
Course 1. Apply the concept of strategy and the strategy-making process and how it relates to
Intended the organizational goals and objectives.
Learning
Outcomes 2. Identify analytical tools, techniques, and frameworks commonly used in assessing
the market and industry.

3. Apply different measurement frameworks in the existing business in the local

market.
Content I. Basic Principles of Financial Management
Coverage II. Role of Strategy-Making Process
References 1. Ruby F. Alminar-Mutya, DBA, Basic Business Finance: Management Approach, 125
Pioneer St., Mandaluyong City 1550: National Book Store, 2010
2. R2. Lawrence J. Gitman, Principles of Managerial Finance 13 th Ed., Pearson
Education South Asia PTE. LTD., 2010
Course 1. Quizzes
Requirements 2. Examinations
3. Term Paper
Prepared by: ARMALYN S. CANGQUE, MBA
MODULE
Reviewed and Approved by:
2
Subject Area Coordinator: JOHN RICK B. OGAN, MBA

Dean, CBM : RICHEL P. ALOB, Ph. D.

GAD Director : MARY ANN T. ARCEŇO, Ph.D.

CIMD, Chairperson : MA. JANET S. GEROSO, Ph.D.

QA Director : DONNA FE V. TOLEDO, Ed. D.

VP- Academic Affairs : SAMSON M. LAUSA, Ph. D

 LESSON

3 FINANCIAL FORECASTING FOR STRATEGIC GROWTH

18 HOURS

This chapter provides thorough discussion of the the market and the industry and the different
tools in assessing the market and industry. This lesson also discusses how external financing needed affects
the pro-forma financial statements of a company.

Learning objectives
1. Know what is financial forecasting and distinguish different approaches, strategies,
methods, and techniques that are used for the strategic growth of the company.
2. Know the percentage of sales concept by recounting the contents of the financial
statements and apply formulas that are used in interpreting data.
3. Describe how external financing needed affects the pro-forma financial statements of a
company.
4. Identify business situations and the strategies used in financial forecasting for strategic
growth.

Are you watching a weather forecast? What does the news anchor do in a weather forecast? Do
weather conditions forecasted happen most of the time? What is the probability of a weather
condition in a forecast to occur or happen?

Financial forecasting is the process of estimating the relevant future events using historical data and other
relevant data to come up with a strategy to achieve a business plan. This lesson will help us learn more
why financial forecasting plays a great role in the growth of business firms.
FORECASTING AS A PRINCIPLE OF MANAGEMENT

What is forecasting? Forecasting is the technique of estimating the relevant future events and
problems on the basis of past and present behaviour or happenings. It involves detailed analysis of
the past and present events to get a clear cut idea about probable events in the future. So,
forecasting may require the use of various statistical techniques though it is not necessary.
Forecasting is a systematic guessing of the future course of events with the help of analysis of past
and present events. It provides basis for a planning. Therefore, forecasting is a scientific guess of
the future events, by scientific, there should be a basis.

Neter and Wasserman state “Business forecasting refers to the statistical analysis of the past
and current movement in the given time series so as to obtain clues about the future pattern of
those movements.” Forecasting is concerned with future events. It is necessary for planning
process. Planning is not possible without forecasting. The impact of future events has to be
considered in the planning process. However, the future events that might happen could be
guessed only to some extent. Inference or conclusions are drawn from past and present relevant
events under scientific forecasting.

The analysis of various factors may require the use of scientific, mathematical and statistical
techniques. Personal observation also helps forecasting. The application of scientific, mathematical
and statistical techniques is much more reliable than the use of ordinary tools for obtaining
conclusions. The need and importance of forecasting can be found out with the help of key role
played for forecasting in the management process especially in planning process. Various
techniques of forecasting are used in the field of business. An accurate forecasting may reduce the
degree of uncertainty. In practice, more than one technique can be combined for making the
forecasting effective. The opinion of experts like Sales, Finance, purchase and the like is sought
under this method and the meritorious one is accepted. Quantitative and qualitative information is
collected from field survey and from this forecasting is done.

What is Financial Forecasting?  Financial forecasting is looking ahead to develop a financial plan
for the future. Financial forecasting is very important for the strategic growth of a firm.

Methods of Financial Forecasting:

1. Using Pro Forma or Projected Financial Statements
2. Using Percent-of-Sales Method

Financial Statements for Forecasting:

1. Pro Forma Income Statement
2. Cash Budget
3. Pro Forma Balance Sheet.
The first step is to develop a sales projection.
Steps in a Pro-Forma Income Statement
1. Establish a sales projection
2. Determine a production schedule (or production requirements)
3. Compute other expenses
4. Determine profit by completing an actual pro forma income statement

For Example:
USING THIS FORMULA TO DETERMINE THE UNITS TO BE PRODUCED…

The result is…

Now, compute other expenses…
This is how you compute for your COGS or Cost of Goods Sold and GROSS PROFIT:

 TIP: Always pay attention to the details and familiarize how the values were computed. It is
important to compute for the correct value. As you have noticed, each value is needed in
computing the other. Therefore, if you mistakenly computed the value of one, you will arrive at a
wrong answer.
 *-

*=
*-

*=
*-

*=
*-

*=
*-

*=

Next Step: Cash Budget

Solution, 15,000
(current)
X ,20) = 3,000

Solution, 12,000
(previous)
X .80) = 9,600
 *

+
*x *= *=

*/ *=
 NOTE: We will be using this balance sheet from Dec. 31, 1999 to come up with the Pro-
forma Balance sheet.
How did we arrived at these values?
If you are paying attention at the illustrations, you will notice that the values were derived from
the previous illustrations and the previous Balance Sheet (December 31, 1999). Analyze using
the hints below:

Cash: Ending Cash Balance for June as seen in Table 4-15

Marketable Securities: Given
Accounts receivable: Table 4-10
Inventory: Table 4-7
Plant and Equipment (PPE): Table 4-13A and 4-13B
Accounts Payable: Table 4-13B (Monthly material purchased – on credit)
Notes Payable: Table 4-15 Cumulative Loan Balance for June
Long-Term Debt: Constant
Common Stock: Constant
Retained earnings: Previous Retained earnings plus the increase in Table 4-8.
To discuss further, here is another example:
As you can read in the table, there are selected financial ratios. What are these for and what do these
financial ratios mean?
It is not enough to solve for the problem or find the values of certain assets, sales, liabilities, etc. As
financial managers, it is our duty to interpret the given data and the results of what we have solved.
This is the first step in making financial forecasts and financial planning. We will be discussing financial
ratio in the next lesson.

PERCENT OF SALES METHOD – the quick and dirty approach

A short-cut, less exact, easier method of determining financing needs (The “quick and dirty”
approach). This method assumes that B/S accounts will maintain a constant percentage relationship to
sales. Hence,
Assets / Current Sales = % of Sales

The percentage-of-sales method is used to develop a budgeted set of financial statements.

Each historical expense is converted into a percentage of net sales, and these percentages
are then applied to the forecasted sales level in the budget period. For example, if the
historical cost of goods sold as a percentage of sales has been 42%, then the same
percentage is applied to the forecasted sales level. The approach can also be used to forecast
some balance sheet items, such as accounts receivable, accounts payable, and inventory.

The basic steps to follow for this method are:

1. Determine whether there is a historical correlation between sales and the item to be
forecasted.
2. Estimate sales for the forecast period.
3. Apply the applicable percentage of sales to the item to arrive at the forecasted amount.

For this method to yield accurate forecasts, it is best to apply it only to selected expenses and
balance sheet items that have a proven record of closely correlating with sales. Outside of
these items, it is better to develop a detailed, line-by-line forecast that incorporates other
factors than just the sales level. This more selective approach tends to yield budgets that more
closely predict actual results.

More sales will mean more assets which will require more financing.It can be summarized by using the
Required New Funding Formula :
RNF = A/S (change S) – L/S (change S) – PS2m(1-D)

Where:
A/S = % relationship of assets to sales
change S = Change in Sales (forecast – prior sales)
P = Profit margin
S2 = Forecasted Sales
D = Dividend Payout Ratio. (1-D) is retention rate.
 Disadvantages of the Percentage-of-Sales Method

However, these advantages are more than offset by several major disadvantages, which are:
Many expenses are fixed or have a fixed component, and so do not correlate with sales. For
example, rent expense does not vary with sales. Many balance sheet items also do not correlate
with sales, such as fixed assets and debt.
Step costing may apply, where a cost is variable but will change to a different percentage of
sales when the sales level changes to a different volume level. For example, purchase discounts
may apply to purchases once the unit count passes 10,000 per year.

STRATEGIC PLANNING FOR MY COLLEGE

On a separate sheet of paper answer each question in not less than 5 sentences. (5 points each)

1. Differentiate pro-forma method from percent-of-sales method of financial forecasting.

2. If you are the financial manager of a company, which method would you prefer and why?
3. Why is it that business organization needs external financing? Are those that do not need external
financing considered as healthy businesses? Explain your answer.
4. What is the difference between cash, accounts receivable and inventories?
5. Define what is long-term liabilities and short-term liabilities

Quiz.

Solve for the following problems:

Problem A. Complete the data and solve for the production requirements given the following data of HA
Corporation.

Projected Sales (first 6 months, 2020)

BE
DS
Q 50
uantity 0
S P8
ales ,500
Price
S 1.
ales
Revenue
T P4
OTAL ,250,000

Stock of Beginning Inventory

B
EDS
4. Production Requirement: (Show your solution). Desired Ending Inventory: 100 Beds.

Scores for each number:

1: 5 points
2:3 points
3: 3 points
4: 5 points

Problem B: Illustrate the value of the ending inventory and create a Pro Forma Income Statement using
the data in Problem A and the herein additional data.
Note: Tax is 20% of Earning before taxes, interest expense is P40,000, Payment of common stock
dividends amounting to P10,000, and selling, general and administrative expenses amounting to P10,000.

Unit Costs
B
EDS
M P
aterials 3,000
L P
abor 2,500
O P
verhead 500
T P
OTAL 6,000

Total Production Cost

B
EDS
U 4
nits to be
produced .
C P
ost/unit 6,000
T
otal Cost

Allocation of Manufacturing Costs and Determination of Gross Profits

BED
S
Q 500
ty. Sold
S P8,50
ales Price 0
S 1.
ales
Revenue

C
OGS
O
ld
Inventory
Q 20
TY 0

C 62
ost/unit 50

T 2.
otal