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INTRODUCTION :Executive summary of the project

In simple words, a financial plan is a path to help you achieve your lifes
financial goals. It is the process of making learned money management
decisions in order to safeguard your future.
A financial plan helps you to fulfill financial goals and meet personal
priorities. It takes into consideration your available resources,
responsibilities, lifestyle and risk appetite. Allocating your savings across
various asset classes to achieve an appropriate risk-reward balance and
ensuring long-term financial security are the basics of financial plan.
You need to ask yourself some questions before making a financial plan, like:
What is your current financial situation? What is your vision of your future
financial situation? How do you plan to achieve your vision?
You need to analyze what your financial needs and goals are. Then, you
measure the resources you need to meet those goals in money terms.
Specify the time period during which you want to achieve these goals. Then
you write an action plan to fulfill your goals, like, what products to buy and
what types of savings to make.
You can of course make your financial plan yourself, but a financial planning
expert can offer the right financial skills and tools to help you realize your
financial plan.
The basics of financial plan may include some of the following questions:
Will your family be financially secure, whatever happens to you?
Are your finances taxes efficient?
Are you getting the best return in a rising or a falling stock market on your
investments?
Is your childs education financially secure? How about for their wedding?
Do you have enough money for your retirement?
You should feel comfortable if your answers are yes to all the above
questions. But even a single no means that you should feel uncomfortable.
You need a good financial plan. See a financial planning expert to chart out
the best recommendations for you. Your introduction to financial plan starts
right here.

Financial planning is the task of determining how a business will afford to

achieve its strategic goals and objectives. Usually, a company creates a
Financial Plan immediately after the vision and objectives have been set.
The Financial Plan[1]describes each of the activities, resources, equipment

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and materials that are needed to achieve these objectives, as well as the
timeframes involved.
The Financial Planning activity involves the following tasks;---

Assess the business environment

Confirm the business vision and objectives

Identify the types of resources needed to achieve these objectives

Quantify the amount of resource (labor, equipment, materials)

Calculate the total cost of each type of resource

Summarize the costs to create a budget

Identify any risks and issues with the budget set

Performing Financial Planning is critical to the success of any organization. It

provides the Business Plan with rigor, by confirming that the objectives set
are achievable from a financial point of view. It also helps the CEO to set
financial targets for the organization, and reward staff for meeting objectives
within the budget set.
The role of financial planning includes three categories:
1. Strategic role of financial management
2. Objectives of financial management
3. The planning cycle
When drafting a financial plan, the company should establish the planning
horizon,[2] which is the time period of the plan, whether it be on a short-term
(usually 12 months) or long-term (25 years) basis. Also, the individual
projects and investment proposals of each operational unit within the
company should be totaled and treated as one large project. This process is
called aggregation.

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Financial Planning& Forecasting.

Financial forecasting and planning is usually an essential part of the business
plan, and would be done as part of setting up the organisation and obtaining
funds.
Financial forecasting and planning is also an essential activity to ensure good
management keeping the organisation solvent is a key objective. The
governing body of the organisation has responsibility for financial
management, both day to day basis and long range. In order to carry out this
responsibility, financial information needs to be organised and analysed so
that the long-term implications of decisions can be understood.
Financial forecasting and planning involves:
Assessing the nature and scope of the enterprise to determine what
resources will be needed and where they will come from;
Projecting financial requirements and resources needed into the future to
draw up a budget;
Setting up procedures and accounting systems to ensure financial control
and accountability (please refer to Social Enterprise Works Information Sheet
Financial Accounts)
Utilising various forms of financial analysis to guide major financial
decisions and ensure the organisation is always able to cover its outgoings.

Accounting
Youneedtounderstandhowdepreciationisusedforbothtaxandfinancialreportingpu
rposes;howtodevelopthestatementofcashflows;theprimacyofcashflows,rathert
hanaccru-

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als,infinancialdecisionmaking;andhowproformafinancialstatementsareusedwit
hinthefirm.
Information systems:
Youneedtounderstandthedatathatmustbekepttorecorddepreciationfortaxandfinancialreporting;theinformationneedsforstrategicandoperatingplans;andwhatdataare
neededasinputsforcash-planningandprofit-planningmodules.
Management:
Youneedtounderstandthedifferencebetweenstrategicandoperatingplans,andthe
roleofeach;theimportanceoffocusingonthefirmscashflows;andhowuseofprofor
mastate-mentscanheadoff
Marketing:
Youneedtounderstandthecentralrolethatmarketingplaysinformulatingthefirmslongterm,strategicplans,andtheimportanceofthesalesforecastasthekeyinputforbot
hcashplanningandprofitplanning.

Operations:
Youneedtounderstandhowdepreciationaffectsthevalueofthefirmsplantassets;h
owtheresultsofoperationsarecapturedinthestatementofcashflows;thatoperati
onsaremonitoredpri-marilyinthefirmsshorttermfinancialplans;andthedistinctionbetweenfixedandvariableoperatingcosts
.
Cash
flowistheprimaryfocusoffinancialmanagement.Thegoalistwofold:tomeetth
efirmsfinancialobligationsandtogeneratepositivecashflowforitsowners.Fi
nancialplanningfocusesonthefirmscashandprofits
bothofwhicharekeyelementsofcontinuedfinancialsuccess,andevensurvi
val.Thischapteroutlineshowthefirmanalyzesitscashflows,includingthee
ffectofdepreciation,andtheuseofcashbudgetsandproformastatementsa
stoolsoffinancialplanning.

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Sources of Funds
It is likely that all necessary funding will come from one source and it will be
necessary to put together a package of funding. This may include:

Income from trading

Grants and equity for start-up
Overdrafts, loans
Fundraising, donations, sponsorship
Leasing arrangements for major capital expenses (vehicles, photocopiers)
In-kind (non-financial, but money-saving) items (e.g. Premises)
Owners/shareholders

Financial planning will involve consideration of which type of funding is

suitable for different parts/purposes of the enterprise, and which sources are
appropriate at different stages. Most community enterprises seek to become
sustainable in the longer term of they obtain grant and other one-off types of
support to help with starting-up.

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Budget

A budget for the first year is the basic financial planning tool, and is useful
to:
Assign a value to assets and resources needed in the business;
Identify needs and possible problems in advance;
Help identify areas of record-keeping;
Monitor actual income and expenditure.
The budget generally sets out Income (source of funds) and Expenditure,
with expenditure broken down into Capital expenditure and Revenue
expenditure: - Capital Expenditure: one-off expenditure, usually on fixed
and long-termassets. These would include property and equipment,
purchases;
Revenue Expenditure: costs of day-to-day running of the business, which
are expended within the financial year. These are divided into;
Direct Costs: linked to level of use/service/production e.g. materials;
Fixed Overheads (indirect): which generally remain the same with any
level of activity (rent, rates);
Variable Overheads (indirect): e.g. travel, telephone.
These classifications are important in determining the minimum level of
income necessary to avoid a loss (see Breakeven point below), and for
calculating the Profit and Loss Account.
The objectives of the budget is to show that over a year the income and
expenditure are at least equal, and hopefully the income would be greater
than the expenditure (profit).

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Cash Flow

The budget gives an overview of income and expenditure for the year, but on
a monthly basis the organisation could still find they do not have enough
funds (cash) to cover expenses.
A cash flow forecast helps to avoid this situation by looking at individual
items of income and expenditure on a monthly basis to form a matrix
(months across the top, items down the side), with a balance shown at the
end of the month.
The cash flow chart can include a column showing the budget for that item,
which allows potential problems to be highlighted. Where actual income and
expenditure differ from those set out in the budget, it is called variance,
and in turn the scale of monthly variance will trigger the need for action.
Some of the most likely problems are: Rising costs - compare actual figures with forecasts. Look particularly for
rising overheads (lighting, heating, advertising)
Under pricing which leads to inadequate income. Check that the selling
price of products/services is covering costs.
Over-trading income delayed so to doesnt cover up-front costs (e.g. rent,
rates)

Profit and Loss Accounts

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The Profit and Loss Account, also called trading accounts, is normally used to
show the performance of the business over the past year in terms of Gross
Profit (after subtracting direct costs but before subtracting indirect costs) and
Net Profit (after subtracting tax). It can be projected forward to give a Profits
Forecast, so that potential fro business growth, or any potential losses, can
be anticipated.

Balance Sheet
Balance Sheets show the overall value of the business at a fixed point in
time, and show it is in the black/red (solvent or not). They usually are part
of theend-of-year accounts, but are often produced more frequently to
provide projections for a future point in time to help with financial
management decisions.
The Balance Sheet includes:What the organisation owns (assets), including Fixed Assets (property and
major capital items) and Current Assets (stock, debtors, investments, cash);
and
What the organisation owes others (liabilities), including Current Liabilities
(creditors) and Long Term Liabilities (such as loans).
The Bottom Line of this account shows whether the assets are greater than
the liabilities (and the organisation is solvent) or are less than the liabilities
(in which case the organisation may be insolvent and in most cases should
not be trading).
Breakeven Point
A useful financial technique is the calculation of the Breakeven Point, which
is the point at which the income equals the expenditure. The technique is
most helpful when income is linked to units of actual service provision or

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products sales, so that the Breakeven Point is the level of income that will
cover both direct costs associated with that level of output as well as
overheads (see budget above).
Risk Analysis
Good financial planning includes risk analysis anticipating aspects of the
business where things might go wrong, assessing the possible impact and
having contingency plans prepared to counteract the impact. Risks will be
different for different enterprises, but the governing body will need to ask a
series of questions such as What if costs increase? or What if the worst
should happen?

REVIEW OF LITERATURE -:
Financial Performance Literature :-We review the growing literature relating
corporate environmental performance to financial performance. We seek to
identify achievements and limitations of this literature and to highlight areas
for further research. Our primary interest is to assess the adequacy of the
literature in informing corporate managers how, when, and where to make
pro-environment investments that will pay off with financial returns for longterm shareholders. To do so, we create a conceptual framework that maps
the influence of regulators, public health scientists, environmental
advocates, consumers, employees, and other interested parties upon
corporate financial returns. Our discussion has relevance to all parties
interested in influencing corporate actions that affect the environment.

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AnalyzingtheFirmsCashFlow
Cash flow, the lifeblood of the firm, is the primary focus of the financial
manager both in managing day-to-day finances and in planning and making
strategic deci- sions aimed at creation of shareholder value. An important
factor affecting a firms cash flow is depreciation (and any other noncash
charges). From an accounting perspective, a firms cash flows can be
summarized in the statement of cash flows, which was described in Chapter
2. From a strict financial perspective, firms often focus on both operating
cash flow, which is used in managerial deci- sion making, and free cash flow,
which is closely watched by participants in the capital market. We begin our
analysis of cash flow by considering the key aspects of depreciation, which is
closely related to the firms cash flow.

Developing the Statement of Cash Flows

The statement of cash flows, introduced in Chapter 2, summarizes the firms
cash flow over a given period of time. Before discussing the statement and
its interpre- tation, we will review the cash flow through the firm and the
classification of inflows and outflows of cash.

TheFirmsCashFlows
Figure 3.1 illustrates the firms cash flows. Note that marketable securities
are considered the same as cash because of their highly liquid nature. Both
cash and marketable securities represent a reservoir of liquidity that is
increased by cash inflows and decreased by cash outflows. Also note that the
firms cash flows can be divided into (1) operating flows, (2) investment
flows, and (3) financing flows. The operating flows are cash inflows and
outflows directly related to sale and production of the firms products and
services. Investment flows are cash flows associated with purchase and sale
of both fixed assets and business interests. Clearly, purchase transactions
would result in cash outflows, whereas sales trans- actions would generate
cash inflows. The financing flows result from debt and equity financing
transactions. Incurring (or repaying) either short-term or long- term debt

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would result in a corresponding cash inflow (or outflow). Similarly, the sale of
stock would result in a cash inflow; the payment of cash dividends or
repurchase of stock would result in a financing outflow. In combination, the
firms operating, investment, and financing cash flows during a given
period affect the firms cash and marketable securities balances.

FI G URE 3.1

CashFlows
Thefirmscashflows
(1)OperatingFlows

Accrued
Wages

Labor

(2)InvestmentFlows
PaymentofAccruals

Payment

Raw
Materials

Accounts Purchases
Payable

FixedAssets

Sale

Depreciation

Workin
Process

Overhead
Expenses

Business
Interests

Finished
Goods

Purchase
Sale

Cash
andMarketableSecurities

Operating(incl.
Depreciation) andInterestExpense

(3)FinancingFlows
Payment

Taxes

Borrowing
Repayment

Debt
(Short-TermandLong-Term)

Refund

Sales

CashSales

SaleofStock
RepurchaseofStock
PaymentofCashDividends

Accounts
Receivable

CollectionofCreditSales

Equity

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Financial Analysis
Financial analysis is the process of identifying the strengths and weakness of
the firm with the help of accounting information provided in the Profit and
Loss Account and Balance Sheet. It is the process of evaluation of
relationship between component parts of financial statements to obtain a
better understanding of the firms position and performance.

Ratio Analysis
Ratio analysis can also be defined as the yard stick that provides a measure
of relationship between two accounting figures. Ratio analysis can be used
both in the trend or dynamic analysis and statistical analysis.
Financial ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial condition, its
operations and attractiveness as an investment. Financial ratios are
calculated from one or more pieces of information from a companys
financial statements. For example, the gross martginis the gross profit from
operations divided by the total sales or revenues of a company, expressed in
percentage terms. In isolation, a financial ratio is a useless piece of
information. In context, however a financial ratio can give a financial analyst
an excellent picture of a companys situation and the trends that are
developing

Implications for financial performance and corporate

social responsibility
"We investigate whether CEO implicit motives predict corporate social
performance and financial performance. Using longitudinal data on 258 CEOs
from 118 firms, and controlling for country and industry effects, we found
that motives significant predicted both financial performance (Tobin's Q and
the CAPM) and social responsibility. In general, need for power and
responsibility disposition were positively predictive whereas need for
achievement and affiliation were negatively predictive of outcomes. Contrary
to previous theorizing, corporate social responsibility had no link to financial

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performance. Our findings suggest that executive characteristics have

important consequences for the top level outcomes.

Research Methodology :Welman, Kruger and Mitchell (2005: 2) define research as a process
that
involves obtaining scientific knowledge by means of various objective
methods and procedures. The term objective indicates that these
methods
and procedures do not rely on personal feelings or opinions. Welman,
Kruger and Mitchell (2005: 3) further states that research is a process
of
using scientific methods to expand knowledge in a particular field of
study.
Pellissier (2007: 6) describes research as a systematic investigation to
established facts.
Leedy and Ormrod (2005:2) point out that the following characteristics
are
typical of research:

research starts with a question or problem

research needs a clear goal

research divides the main problem into smaller sub-problems

research is directed by the research problem, questions, or

hypothesis

research accepts certain vital assumptions

research requires the collection and interpretation of data in

order to

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resolve the problem that initiated the research

. research follows a cycle comprising of logical steps

RESEARCH APPROACH
Qualitative approach
According to Johnson and Christensen (2008: 34) qualitative research
relies
primarily on the collection of qualitative (non-numerical data such as
words
and pictures) data.
Welman, Kruger and Mitchell (2005: 188) refer to it as an array of
techniques
which seek to describe, decode, translate, and otherwise come to
terms with
the meaning of naturally occurring phenomena. Welman, Kruger and
Mitchell (2005: 193) further outline the use of five data collection
methods
used by qualitative research, namely:
Case study research
The term case study pertains to the fact that a limited number of units
of
analysis (often only one) are studied intensively. The units of analysis
include individuals, groups and institutions. The term case study does
not
refer to a specific technique that is applied but rather directed towards
understanding
complexities.

the

uniqueness

of

particular

case

in

all

its

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Focus groups
Focus groups consist of a small number of individuals or interviewees
that
are drawn together for the purpose of expressing their opinions on a
specific
set of open questions. The aim of using such focus groups is to gather
information that can perhaps not be collected easily by means of
individual
interviews.
Participatory research
According to Welman, Kruger and Mitchell (2005: 205) participatory
research
involves the integration of elements such as social investigation,
educational
work and action in an interrelated process. In participatory research
the roles
of the researcher and participant are as follows:
. the participants are actively involved in the planning and implantation
of the research outcomes and are thus empowered
. the researcher is dependent on the participation of research group or
Individuals.
Experimental research
All types of experimental research involve some sort of intervention. In
other
words, the participants (units of analysis) are exposed to something to
which
they would not have been subjected to otherwise. In the hypothesis we
express the influence that the independent variable is expected to
have on
the dependant variable and it is this influence that is measured in the

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experiment.
APPROPRIATE RESEARCH APPROACH
The researcher has chosen to use a combination of qualitative and
quantitative approaches. In order to fully answer the main research
question
raised at the beginning of this study, Dichotomous, open-ended and
closeended questions have been included in the survey.
STRUCTURE OF THE QUESTIONNAIRE
The nature of this research topic dictated the use of a questionnaire
survey as
the primary research tool. Questionnaires are very structured data
collection
techniques in which respondents are asked the same set of questions.
The questionnaire (Annexure A) is divided into two sections. Section A
contains four questions designed to obtain particular biographic
information
about the respondents such as their age, job titles, experience and
qualifications. Section B consists of questions which were designed to
research both general and specific aspects of budgeting, forecasting
and
financial planning

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Data Analysis and Interpretation