Predicción Hidrológica

your life goals. The planner can take a "big picture" view of your financial situation and make financial planning recommendations that are right for you. The planner can look at all of your needs including budgeting and saving, taxes, investments, insurance and retirement planning.

In addition to providing you with general financial planning services, many financial planners are also registered as investment advisers or hold insurance or securities licenses that allow them to buy or sell products. Other planners may have you use more specialized financial advisers to help you implement their recommendations. With the right education and experience, each of the following advisers could take you through the financial planning process. Ethical financial planners will refer you to one of these professionals for services that they cannot provide and disclose any referral fees they may receive in the process. Similarly, these advisers should refer you to a planner if they cannot meet your financial planning needs.

The Financial Planning Process consists of the Following five Steps 1. Establishing and defining the client-planner relationship.

The financial planner should clearly explain or document the services to be provided to you and define both his and your responsibilities. The planner should explain fully how he will be paid and by whom. You and the planner should agree on how long the professional relationship should last and on how decisions will be made.

2. Gathering client data, including goals.

The financial planner should ask for information about your financial situation. You and the planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about risk. The financial planner should gather all the necessary documents before giving you the advice you need.

3. Analyzing and evaluating your financial status.

The financial planner should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.

4. Developing and presenting financial planning recommendations and/or alternatives. The financial planner should offer financial planning recommendations that address your goals, based on the information you provide. The planner should go over the recommendations with you to help you understand them so that you can make informed decisions. The planner should also listen to your concerns and revise the recommendations as appropriate.

5. Implementing the financial planning recommendations.

You and the planner should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your "coach," coordinating the whole process with you and other professionals such as attorneys or stockbrokers.

The Control Process:

When plans are finalized and put to action or implemented, then the actual performance is compared with the budgeted numbers. The difference between the actual and budgeted numbers is called variance. This variance is investigated as to know the real causes of the difference. The investigation leads to initiate the corrective action and to adjust the budget of future periods. The investigation result is known as feedback. There are three types of feedback emerging from investigation of variance.

1. Change The Strategy or Course of Action – If something went wrong with strategy, the course of action is fine tuned or changed to ensure future actual results conform to original plan. For example, if sales was less than the budgeted and variance investigation revealed that sales force could not be motivated then some incentives and bonuses can be offered to motivate the sales force. The future period budgets will be adjusted for the proposed incentive expenses.

2. Do Nothing – if the results are in line with the planned, no action is required.

3. Change The Plan – Targets or plan itself is revised rather than changing strategy. For example the targeted profit is scaled down.

For example we continue the example in 1 above, if sales were less than budgeted and investigation revealed that the sales target was not realistic, then the sales targets will be adjusted for future period.

Corporate Finance –FIN 622 VU

The following topics will be discussed in this lecture.

ƒ Budgeting process

ƒ Purpose / functions of budgets

ƒ Cash budgets – Preparation & interpretation The Budget Process

The Budget process allows the company to:

ƒ set its fiscal objectives in respect of revenue, expenditure, debt repayment and investment;

ƒ maintain an effective fiscal control and plan for the coming year and beyond;

ƒ allocate the available resources, consistent with the Company's strategic objectives and priorities;

ƒ fulfill the legislative requirements for the Budget; and

ƒ Seek authority from Parliament for spending.

All Managers have a key role in the budget process. Together, they agree on the budget strategy and priorities for spending. On an individual level, Managers identify priorities for departmental chief executives to guide preparation of Budget submissions.

Budget Preparation Process:

1. Budget Policy & Details – Communicating To All

This includes disseminating details like the budgeting period, time table and formation of budgeting committee.

The main objective is to make clear of the scope and roles of people involved in this process. Normally, budgeting period is a period of 12 months. It may be calendar year or any combination of 12 months. However, it is always broken down into 12 periods of one month or into quarters because of comparison with actual performance and control purposes.

This process is formalized by forming a committee comprising of different front line managers and a very senior person is appointed to head this committee. Such a person should have a clear vision of future and unambiguous understanding of corporate objectives. Budgets are used to translate the ultimate objectives into monetary terms as a course of action to accomplishment of those objectives.

A budget has to be finalized before the start of the period for which it is being prepared. For example, budget for 2006 must be completed before January 2006. The time to complete budget will vary firm to firm, on the type of budget and the budget period. There are different phases in budget preparations and timeliness is set for each phase.

2. Determining The Limiting Factor

Budget preparation normally begins with the identification of limiting factor. This refers to a factor that limits the stretch of company or hinders company’s achievement of specific objective. The first step will be to determine the sales during the budget period. The first question will be “do we have the capacity to produce this much?” Assuming that the answer is “no” then, production capacity is the limiting factor. You can’t achieve what you have determined and need to cut-down your plans or revise your target sales. The other areas may be the availability of labor force and/or raw materials. If there’s no limiting factor then company can start with the target sales and if there’s one that hampers target, then it would be what can be achieved with the available resources.

3. Production Budget Preparation

The primary source of inflow comes from the principal activity or sale of goods. Therefore, in budget preparation sales is the kick off point.

Sales budget is prepared in quantitative form. Each product sales is mentioned in number of units to be produced. There is a standard specification of a unit in terms of the input material requirements; labor time and amount of overhead needed to manufacture it. There’s also a standard selling price of each product unit.

Sales in monetary term are calculated by multiplying number of units to be produced by standard selling price.

Corporate Finance –FIN 622 VU