Bernardo, Aeylla V.

Topic: Projected Financial Condition and Significant Ratios, Turnovers and Rates
of Returns

Learning Outcomes:

To be acquainted with making a projected financial condition

To determine how to test the projected financial position with financial analysis
tools

Introduction
Projected or estimated financial statement attempts to present a reasonably accurate
idea of what a firm's financial situation would be if the present trends continue or certain
assumptions hold true. Pro forma or projected statements are used routinely in
preparing 'what if' scenarios, formulating business plans, estimating cash requirements,
or when submitting financing proposals. (http://www.businessdictionary.com)
Body:
I.
Projected Financial Condition
The final part of the financial plan is the presentation of the projected financial
condition for the next five years. The past topics (forecasting, financial
assumptions, cash budget and operating and capital expenditure budget) will
help in preparing the:
a) Projected Financial Position
b) Projected Statement of Income and Expenses
c) Projected Cash Flows

d) Projected Statement of Earnings and Owners Equity

Making these statements will demonstrate the perspective of the next five years

supposing the plan has been completely employed.

Presentation of the accounting years will start from the first year, being in the left
column after the account title to the fifth year, being in the right most column.
Example:

Account Title
xxxxxxxxxx

2015
P xxx.xx

2016
P xxx.xx

2017
P xxx.xx

2018
P xxx.xx

2019
P xxx.xx

All of the estimated effects of the proposed plan must be reflected on every
affected account title.
1. Review or lift projections based on the movements of accounts on
its natural course (without reflecting the effects of the proposed
plan.)
2. Integrate the estimate effects of the implementation of the plan
based on financial assumptions, cash budget, operating and capital
expenditure budget.
3. Adjust accounts correspondingly for consistency and balancing of
the projected financial condition.

II.

Significant Ratios, Turnovers, Rates of Returns

After the completion of the projection, test the new figures with financial
analysis tools, especially those that have been previously been found to be
unfavorable.
It must reveal improvements or ratios that have turned into favorable under the
projected financial statement.

Revisit your statement of the problem and check if the conditions have been
cured.

Summary: The last part of the financial plan is making a projected financial condition.
The proponent must keep in mind that all of the estimated effects of the proposed plan
must be reflected on every affected account title. After making a projected plan, the
proponent shall compute the financial ratios, turnover and rate of returns of the
projected financial statements and the results shall have improvements or ratios that
have turned into favorable and that the conditions have been cured.