A STUDY ON FINANCIAL PLANNING

AND FORECASTING

PROJECT DONE BY: - PRINCE YADAV

2K21/DMBA/91

GUIDED BY: -SAKSHI KUKREJA

DELHI SCHOOL OF MANAGEMENT

DECEMBER 2021

ABSTRACT
Financial Planning and Forecasting is the estimation of value of variable or set of
variables at some prospect point. A Forecasting work out is usually carried out in
order to provide an aid to decision-making and planning in the future. To study and
analyze the existing financial planning. To study finance and forecasting in aavin
co-operative union limited. Working capital of the Aadvin. Was growing and
showing positive working capital per year. The Production capacity has been
increased in the FY 2018-2019 by way of taking Loan. The Sales turn over need to
be increased proportionally to keep the financial position of the company in a
healthier manner. The study was undertaken on the financial planning and
forecasting of the company. Tool such as ratio analysis, schedule of changes in
working capital, trend analysis have been used to find out the company’s efficiency
in performing all its functions.
 INTRODUCTION
Financial Planning and Forecasting is the guesstimate of value of flexible or set of
variables at some future point. A Forecasting exercise is usually agreed out in order
to supply an aid to decision-making and planning in the future. Forecasting has
emerged as one of the most important aspects of corporate planning, forecasting
has emerged as one of the most important aspects of corporate planning.
Forecasting has become an very useful tool for trade to be hopeful of profitable
trends and prepare themselves either to benefit form or to counter them.

Good financial planning and forecasting characterizes a plan of what a firm

proposes to do in the future. Do, naturally planning over such horizon tends to be
fairly in aggregative terms. While there are significant variations in the aptitude,
degree of carry out and level sophistication in financial planning across firms, we
need to focus on common elements which include economic assumptions, sale
forecast, Pro format statements, Asset requirements and the mode of financing the
investments.

In universal 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 treasury some income for short-term and long-term
savings. A financial plan can as well be an advantage 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 accessible business, or real domain.

Financial forecast or financial plan can also refer to an yearly protrusion of income
and expenses for accompany, division or department. A financial plan can also be
an estimation of cash desires and a conclusion on how to raise the cash, such as
through borrowing or issuing additional shares in accompany. The experience that
I gathered over the period of my research as certainly provided the management
knowledge which I trust will help me in future.
 Meaning of financial planning

Financial planning is that all business unit whether it is an industrial company, a

trading distress or a production company needs funds for moving on its actions
successfully. It requires funds to acquire fixed assets like machines, equipment’s,
furniture’s etc. and to acquire raw equipment or complete wares, to pay its
creditors, to meet its day-to-day fixed cost, and so on. In fact, accessibility of
passable finance is one of the most central factors for victory in any business.
However, the prerequisite of finance, now-a-days, is so large that no being is in a
position to provide the whole quantity from his individual sources. So, the
entrepreneur has to depend on other sources and use a mixture of ways to raise the
indispensable amount of funds. In the preceding coaching you learnt about the
sources and methods of raising funds. You know that the progression of raising
funds require sizeable amount of time and cost. This has its own costs. Hence,
every businessman has to be very watchful not only in assessing the firm’s
prerequisite of finance but also in deciding on the forms in which funds are raised
and utilized. In this lesson, you will learn about the process of estimating the firm’s
economic constraint and deciding on the example of finance.

The Financial Planning Process

 Assess your financial situation.

 Create a budget.
 Set your financial goals
 Know your risk tolerance.
 Work out and execute a basic financial chart.
 Regularly review and adjust your financial plan.
 Process of financial planning

The correct investment strategy and sound financial advice will determine how you
live today and in the future.  There are six stages to develop a financial plan and to
carry out personal money management. From beginning to end, a certified financial
planner professional guides you through the financial planning process - keeping in
view your current financial situation and economic background.

1) Identify your Financial Situation

The first stage of the financial planning process constitutes assessment on what is
happening in your life right now and how you can change your financial situation. The
key areas to reflect are:

Household budgeting –This is an important area as after calculating the monthly costs

spent at home, you’d be able to figure out how much you are left with to save or invest.

Family commitments and Living Expenses – Are you single or married? Do you
have children? What are their living and lifestyle expenses?

Tax Standing and Strategies – How do you manage taxes? Are you living or working
abroad?

Current investments or saving reserves – How much savings or debts you have right
now?

2) Determine Financial Goals

Experts say when you have identified your goals; you’re most likely to achieve them.
Highlighting the financial goals serves as an important aspect of financial planning.
Subjected to what phase in life you have reached, these goals could be:

The sole purpose of this step is to differentiate your needs from your wants.  Apart
from these, the goals or objectives may range from spending your entire income into
developing a long-lasting investment program for future financial security. However,
you must select which goals you need to pursue.
3) Identify Alternatives for Investment
After a thorough understanding of your financial needs has been taken and all the
appropriate financial goals have been cemented down, next thing is the investment
alternatives or specific recommendations from your financial planner.

By taking a good look at your short-, medium- and long-term goals, an integrated
investment strategy would be developed based on your set requirements. Furthermore,
the objectives would be looked upon again and it will be analysed how far you are
down the road to achieving your short- and long-term financial goals. Taking in
account your timeframe, cash flow, risk tolerance, current insurance coverage, tax
strategies and investment goals, a range of ideas and financial planning alternatives
would be presented in order to determine which one suits you the best. This will help
you produce more actual and satisfying decisions.

4) Evaluate Alternatives
The proposed recommendations are then further assessed. This is your chance to
discuss the alternatives face-to-face and take necessary actions bearing in mind your
current situation, financial standings and personal interests. If you have any concerns
regarding your financial planner’s recommendations, those can be altered and revised.
Alternatives can be closed down based on the decisions you make.

Risk Evaluation
While evaluating the options you might end up having uncertain ideas. For instance,
choosing your career over studies involves risk. Other financial decisions involve a
comparatively low degree of risk such as saving your money in a savings account or
purchasing some object of great value with it. The option of losing that object is low in
such scenarios.

5) Put Together a Financial Plan and Implement

Once you are content with the recommendations and feel good to proceed, the
implementation of the plan would be carried out. This step of financial planning
process can be considered as an action plan where you will pick ways to achieve your
short, immediate or long-term goals. Often taken as the toughest step for some people.
 Importance of financial planning

Financial Planning is the practice of confining company’s targets, policies,

techniques, projects and budget plans with respect to the financial behavior lasting
for a longer duration. This promises viable and satisfactory financial investment
policies. The importance is as follows.

 Guarantees sufficient funds.

 Planning helps in guarantee a harmony between gregarious and
incoming of assets with the goal that stability is kept up.
 Guarantees providers of funds to efficiently put resources into
organizations which provokes.
 Financial Planning supports development and expansion programs
which support in the long-run sustenance of the association.
 Diminishes vulnerabilities with respect to varying business sector
patterns which can be confronted effortlessly from beginning to end
enough funds.
 Financial Planning helps in moving back the vulnerabilities which can
be a restriction to the enlargement of the organization. This aids in
guaranteeing safety measures and profit of the organization.

Importance of Forecasting
Merits, consequence or importance of forecasting involves subsequent points: -
 Forecasting provides relevant and reliable in sequence about the past
and at hand events and the likely future events. This is necessary for
sound planning.
 It gives confidence to the managers for making imperative decisions.
 It is the basis for production planning premises.
 Limitations of Forecasting
 The collection and analysis of data about the past, existing and future
involves a lot of time and money. Therefore, administrators have to
balance the cost of forecasting with its benefits. Many small firms don't
do projecting because of the high cost.
 Forecasting can only estimate the future events. It cannot agreement
that these events will take place in the future. Longstanding forecasts
will be less accurate as compared to short-term forecast.
 Forecasting is based on certain assumptions. If these resolutions are
wrong, the forecasting will be wrong. Forecasting is based on past
events. Still, history may not repeat themself at all times.
 Forecasting entails proper judgment and skills on the part of managers.
Forecasts may go wrong due to bad decision and helps on the part of
some of the executives. Therefore, forecasts are subject to anthropoid
error.
 RESEARCH METHODOLOGY

Meaning of research methodology

Research organization is a way to systematically solve the research problems.

Rendering in Clifford woody” research compresses defining and redefining
problems, formulating hypothesis or suggested solutions. Amassing, establishing
and evaluating data, making deduction and at last carefully testing conclusion to
control whether they fit the framing hypothesis.

Meaning of research design

The daunting problem that follows the task of defining the research problem is the
grounding of design of the research project, popularly known as the research
design, decision regarding what, where, how much, by what means regarding an
inquiry of a research study establish a research design. a research design is the
procedure of conditions for collection and analysis of data relevance to the research
determination with economy in procedure.

Methodology used

Type of financial statements adopted

Following two types of financial statements are commonly used in analyzing the
firm’s financial position

• Balance sheet.

• Income statement
RATION ANALYSIS:
Current ratio:

Current assets mean, which can be transformed into cash within a year Current
liability mean those requirements maturing within a year. Ideal value of current
ratio is 2:1. It means everyone rupees of current assess less than rs.2; it shows
inefficiency to manage current assets

S.No YEAR RATIO

1 2015 2.48 times

2 2016 1.60 times

3 2017 1.90 times

4 2018 1.82 times

5 2019 1.75 times

Interpretation
From the above table find that, current ratio is maximum 2.48 times in year of 2015, in the year
2017 current ratio is 1.90 times, in the year 2018 current ratio is 1.82 times, in the year, 2019
current ratio is 1.75 times and minimum current ratio in 1.60 in year of 2016.

2020
2019
2018
2017
2016
2015
2014
2013

2.48 times 1.60 times 1.90 times 1.82 times 1.75 times
Liquid ratio

It is really essential for a firm to meet its obligations as they become due. Liquidity
ratios degree the ability of the firm to meet its current obligations. In fact, scrutiny
of liquidity needs the grounding of cash budgets and cash and fund flow speeches;
but liquidity ratio, by beginning a connection between cash and other existing
assets to current compulsions, provide a quick measure of liquidity. A firm should
ensure that it does not agonize from lack of liquidity, and also that it is not too
ample highly liquid.

S.No YEAR RATIO

1 2015 1.86times
2 2016 1.18times
3 2017 1.46 times
4 2018 1.82 times
5 2019 1.75 times

Interpretations
From the above table find that, liquid ratio is maximum 1.86 times in year of 2015, in the year
2018 liquid ratio 1.82 times, in the year 2019 liquid ratio is 1.75 times, in the year, 2017 liquid
ratio is 1.46 times and minimum liquid ratio in 1.18 in year of 2016.

2020
2018

2016

2014
2012
1.86times 1.82times 1.75times 1.46times 1.18times
Proprietary ratio

The proprietary Ratio, which is also known, is the equity ratio, shows the
relationship between shareholders, funds and total asset is financed by shareholders
funds. It is an indicator of solvency. Proprietary ratio shows the general soundness
of the company. The ratio displays the long term or future affluence of the
business.

S.No YEAR RATIO

1 2015 0.12times
2 2016 0.11times
3 2017 0.10times
4 2018 0.08times
5 2019 1.75 times

Interpretation
From the above table find that, proprietary is maximum 1.75 times in year of 2019,
in the year 2015 proprietary is 0.12 times, in the year 2016 proprietary is 0.11 times,
in the year, 2017 proprietary is 0.10 times and minimum proprietary in 0.08 in year
of 2018.

202
0
201
9
201
8
201
7
201
6
1.75 0.12time 0.11time 0.10time 0.08time
201 times s s s s
5
201
4
201
3
Fixed asset ratio

A fixed advantage can also be defined as an asset not directly sold to a firm's
patrons/end-users. As an example, a sweltering firm's current assets would be its
inventory (in this case, flour, yeast, etc.), the value of sales payable to the firm via
credit (i.e. borrowers or accounts receivable), cash held in the bank, etc. Its non-
current properties would be the oven used to bake bread, motor vehicles used to
transport deliveries, cash catalogs used to handle cash payments, etc. While these
non-current assets have price, they are not directly sold to patrons and cannot be
easily converted to cash.

S.No YEAR RATIO

1 2015 1.55times
2 2016 1.96times
3 2017 2.09times
4 2018 3.77times
5 2019 3.79times

Interpretation

From the above table find that, fixed assets is maximum 3.79 times in year of
2019, in the year 2018 fixed assets is 3.77 times, in the year 2017 fixed assets is
2.09 times, in the year, 2016 fixed assets is 1.96 times and minimum fixed assets
in 1.55 in year of 2015.

2020
2018
2016
2014
2012
3.79times3.77times2.09times1.96times1.55times
 FINDINGS
 From the above table find that, working capital is maximum Rs.891298 in
year of 2019, in the year 2015 working capital isRs.791298, in the year 2017
working capital is Rs.782906, in the year, 2018 working capital is
Rs.782700 and minimum working capital in Rs.555493 in year of 2016.
 From the above table find that, current ratio is maximum 2.48 times in year
of 2015, in the year 2017 current ratio is 1.90 times, in the year 2018 current
ratio is 1.82 times, in the year, 2019 current ratio is 1.75 times and minimum
current ratio in 1.60 in year of 2016.
 From the above table find that, liquid ratio is maximum 1.86 times in year of
2015, in the year 2018 liquid ratio 1.82 times, in the year 2019 liquid ratio is
1.75 times, in the year, 2017 liquid ratio is 1.46 times and minimum liquid
ratio in 1.18 in year of 2016.
 From the above table find that, proprietary is maximum 1.75 times in year of
2019, in the year 2015 proprietary is 0.12 times, in the year 2016 proprietary
is 0.11 times, in the year, 2017 proprietary is 0.10 times and minimum
proprietary in 0.08 in year of 2018.

SUGGESTIONS

 The company has portion of Loan component which has created increased
risk of payment commitments. If Sale are not making in the expected lines,
the company will be in deep trouble.
 The Production capacity has been increased in the FY 2018-2019 by way of
taking Loan. The Sales turn over need to be increased proportionally to keep
the financial position of the company in a healthier manner.
 CONCLUSION

The study was undertaken on the financial planning and forecasting of the
company. Tool such as ratio analysis, schedule of changes in working capital,
trend analysis have been used to find out the company’s efficiency in
performing all its functions. To evaluate the effectiveness of the financial
planning being practical at the head office, manufacturing units, and at the sales
branches, to develop more products like milk, butter, gee, etc., Systematic and
promising financial planning procedure to enable the management to predict the
future requirement is good for the company, proper financial planning and
through efficient utilization of resources, the company can aspire for better
prospect for the future growth as well as bring about the economic development
as a whole. If the company following proper planning and forecasting to
improving more profit for future year.