REVIEW OF LITERATURE

AUTHOR: WADE DOKKEN YEAR: 2003 Wade Dokken has profounded in his article on Financial planning and forecasting that a host of benefits can be derived through an efficient financial planning. Foremost is that it helps to eliminate needless expenditure and helps for better monitoring of cash flows. Another great benefit of financial planning is that it helps to maintain an optimal balance between income and expenditure. Benefits of financial planning also include maximized or improved ROI (Return on Investment.) Other obvious benefits of effective financial planning are considerable reduction in tax liability, better management of wealth for the achievement of goals, secured retirement life, and effective estate planning. Above all, financial planning ensures that your dependants are financially secured. AUTHOR: JAMES GRANT YEAR 1998 James Grant has profounded in his article that forecasting has been described as an attempt to foresee the future by examining historical data and patterns and applying judgment to projections created from those patterns. Forecasting technicians might say that the art of forecasting consists of generating unbiased estimates of the future value of some variable, such as sales, on the basis of past and present knowledge and experience. Simply extending past sales data into the future using trend lines or some other simplistic technique do not constitute forecasting. Such extensions of past behaviors are merely mechanical functions; in order to be a true forecast, judgment must be applied.

AUTHOR: JOSEPH GRANVILLE YEAR: 2002 Joseph Granville has propounded in his article that financial planning is the formal process of creating a road map of financial goals while taking into consideration an individual or business's assets, liabilities and credit standing. Financial planning services allow businesses and individuals to take control of their financial accounts and obtain professional advice or counsel to manage real estate, make the best decisions on insurance policies, and evaluate stock options. AUTHOR: MORT JANKLOW YEAR: 1999 Mort Janklow has profounded in his article about financing and its techniques which are of 2 types-equity financing and debt financing. Equity is the investors financial stake in the business. With equity financing, an investor makes money available for use in exchange for an ownership share in the business. This could be as a silent or limited partner (not actively involved in the business) or as a shareholder. Whether equity financing is possible or a good option depends on the business structure and relationship between the borrower and lender. As a business grows and profits are made they can remain in the business. This is called retained earnings. A company with no debt is financed completely by the shareholders or owners. In such a company the investments and profits finance the companys assets. With debt financing, the lender charges interest for the use or rental of money loaned, but does not get a share or equity in the business. Debt financing is familiar to most people because it is the basis of most personal credit. Debt often comes from banks, but it can also come in the form of supplier credit (accounts payable) or in the form of vendor credit for capital purchases.

AUTHOR: JAMES.J.CRAMMER YEAR: 2005 James.J.Crammer has profounded in his article that any financial plan or forecast involves 5 major key factors: Breakeven Balance Sheet Income Statement Cash Flow Forecast Financing He has proposed that all these factors have a major influence on the financial planning and forecasting of a company and a detailed study on them is mandatory for proper forecasts. AUTHOR: WALTER. B YEAR: 1970 Walter B has profounded in his article that 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 reserves some income for short-term and long-term savings. A financial plan can also be an investment 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 existing business, or real estate. In business, a financial plan can refer to the three primary financial statements (balance sheet, income statement, and cash flow statement) created within a business plan. Financial forecast or financial plan can also refer to an annual projection of income and expenses for a company, division or department. A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company. While a financial plan refers to estimating future income, expenses and assets, a financing plan or finance plan usually refers to the means by which cash will be acquired to cover future expenses, for instance through earning, borrowing or using saved cash.

AUTHOR: ROBERT .F YEAR: 1975 Robert.F has profounded that 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 describes each of the activities, resources, equipment 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

AUTHOR: JOSEPH THAM YEAR: 2006 Joseph Tham has profounded in his article that 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:

AUTHOR: WILLIAM MALONEY YEAR: 1979 William Maloney has profounded in his article the key benefits of financial strategic planning and its application to businesses. The following were listed: 1. 2. 3. 4. Creates a common focus and a sense of motivation and ownership. Establishes a common language and commitment. Clearly establishes operating challenges and obstacles. Defines specific operating and staff development initiatives essential for growth. 5. Focuses everyone on the importance of serving both the internal and external customer. 6. Establishes financial operating goals. 7. Defines operating priorities. 8. Benchmarks your marketing and sales strategies against your competition. 9. Provides for the bases of a stronger relationship with your lenders. 10.It creates a definition for success and longevity AUTHOR: WARNER STAN YEAR: 1989 Warner Stan has profounded in his article the various importances of strategic planning and business planning and the steps involved in the same. They can be listed as follows: 1. Define overall business strategies (note: see our Strategies for Success). 2. Establish core business values. 3. Establish a long term Vision Statement what you want to become as a company and what you want your customers to experience from serving them. 4. Complete an external competitive and business climate assessment. 5. Complete an internal organizational assessment (functional challenges and obstacles). 6. Establish a Mission Statement what you have to accomplish internally in the company and externally with customers to achieve your vision statement. 7. Define performance Key-Results Areas, Business Operating Goals, Action Plans and support department objectives and development requirements, Customer Satisfaction Measurements.

8. Develop a Marketing Plan (product offering, market segment strategies, marketing communication and advertising strategy, and sales support) 9. Develop a Sales Plan (territory strategies, key account management programs, sales goals and personnel development requirements). 10.Develop a Financial Plan (sales, revenues, costs, operating expenses, capital requirements and key operating assumptions). 11.Establish reporting and benchmarking timeframes, status meetings and follow-up on Key-Results Areas. AUTHOR: LINCOLN BOROS YEAR: 1978 Lincoln Boros has profounded in his article that Financial Forecasting describes the process by which firms think about and prepare for the future. The forecasting process provides the means for a firm to express its goals and priorities and to ensure that they are internally consistent. It also assists the firm in identifying the asset requirements and needs for external financing. For example, the principal driver of the forecasting process is generally the sales forecast. Since most Balance Sheet and Income Statement accounts are related to sales, the forecasting process can help the firm assess the increase in Current and Fixed Assets which will be needed to support the forecasted sales level. Similarly, the external financing which will be needed to pay for the forecasted increase in assets can be determined. Firms also have goals related to Capital Structure (the mix of debt and equity used to finance the firms assets), Dividend Policy, and Working Capital Management. Therefore, the forecasting process allows the firm to determine if its forecasted sales growth rate is consistent with its desired Capital Structure and Dividend Policy. The forecasting approach presented in this section is the Percentage of Sales method. It forecasts the Balance Sheet and Income Statement by assuming that most accounts maintain a fixed proportion of Sales. This approach, although fairly simple, illustrates many of the issues related to forecasting and can readily be extended to allow for a more flexible technique, such as forecasting items on an individual basis.

AUTHOR: MICHELLE SCHOFIELD YEAR: 2004 Michelle Schofield has profounded in his article that the best technique used for financial forecasting is percentage sales method. The Percentage of Sales Method is a Financial Forecasting approach which is based on the premise that most Balance Sheet and Income Statement Accounts vary with sales. Therefore, the key driver of this method is the Sales Forecast and based upon this, ProForma Financial Statements (i.e., forecasted) can be constructed and the firms needs for external financing can be identified. Percentages of Sales The first step is to express the Balance Sheet and Income Statement accounts which vary directly with Sales as percentages of Sales. This is done by dividing the balance for these accounts for the current year by sales revenue for the current year. The Balance Sheet accounts which generally vary closely with Sales are Cash, Accounts Receivable, Inventory, and Accounts Payable. Fixed Assets are also often tied closely to Sales, unless there is excess capacity. (The issue of excess capacity will be addressed in External Financing Needed section.) For this example, we will assume that Fixed Assets are currently at full capacity and, thus, will vary directly will sales. Retained Earnings on the Balance Sheet represent the cumulative total of the firm's earnings which have been reinvested in the firm. Thus, the change in this account is linked to Sales; however, the link comes from relationship betwen Sales growth and Earnings The Notes Payable, Long-Term Debt, and Common Stock accounts do not vary automatically with Sales. The changes in these accounts depend upon how the firm chooses to raise the funds needed to support the forecasted growth in Sales. On the Income Statement, Costs are expressed as a percentage of Sales. Since we are assuming that all costs remain at a fixed percentage of Sales, Net Income can be expressed as a percentage of Sales. This indicates the Profit Margin. Taxes are expressed as a percentage of Taxable Income (to determine the tax rate). Dividends and Addition to Retained Earnings are expressed as a percentage of Net Income to determine the Payout and Retention Ratios respectively.

AUTHOR: SARAH TACHRARY YEAR: 2003 Sarah Tachrary has profounded in her article It's essential to plan and tightly manage your business' financial performance. Creating a budgeting process is the most effective way to keep the business - and its finances - on track. Budgets and business planning New small business owners may run their businesses in a relaxed way and may not see the need to budget. Budgeting is the most effective way to control the cashflows, allowing investments in new opportunities at the appropriate time. If the business is growing, controlling every aspect of it is not an easy task and splitting budget between different areas such as sales, production, marketing becomes essential. Money starts to move in many different directions through the organisation - having a budget is vital to ensuring that expenses are controlled in the course of business. A budget is a plan to:

Control finances Ensure continuity in funding current commitments Enable ability to make confidential financial decisions and meeting companies objectives Ensure availability of enough money for future projects

Benefits of a business budget There are a number of benefits of drawing up a business budget, including being better able to:

manage money effectively allocate appropriate resources to projects monitor performance meet objectives improve decision-making identify problems before they occur - such as the need to raise finance or cashflow difficulties plan for the future increase staff motivation

AUTHORS: INSTITUTE OF CHARTERED ACCOUNTANTS IN ENGLAND AND WALES YEAR: 1986 These authors have profounded what to include in your annual business plan The main aim of annual business plan is to set out the strategy and action plan for the business. This should include a clear financial picture. The annual business plan should include:

an outline of changes. potential changes to market, customers and competition objectives and goals for the year key performance indicators (KPIs) any issues or problems any operational changes information about management and people financial performance and forecasts details of investment in the business

Business planning is most effective when it's an ongoing process. This allows to act quickly where necessary, rather than simply reacting to events after they have happened. A typical business planning cycle There are a number of key steps to be considered while incorporating business planning routine. An example of a typical business planning cycle: 1. 2. 3. 4. 5. 6. 7. 8. review current performance against last year/current year targets work out opportunities and threats analyse successes and failures during the previous year look at key objectives for the coming year and change or re-establish longer-term planning identify and refine the resource implications of review and build a budget define the new financial year's profit-and-loss and balance-sheet targets conclude the plan review it regularly - for example, on a monthly basis - by monitoring performance, reviewing progress and achieving objectives.