INSTITUTO TECNOLÓGICO DE HERMOSILLO
DEPARTMENT OF INDUSTRIAL ENGINEERING
HOMEWORK NAME:
CHAPTER #1
CLASS:
FINANCIAL PLANNING
TEACHER:
GROUP:
PERIOD:
AUGUST-DECEMBER 2018
STUDENT NAME:
CONTROL
NUMBER
NAME SIGNATURE
Financial Planning
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Financial Planning: Capital Budget, Sales Budget, and Administrative Expenditure, Resúmenes de Planeamiento urbanístico
Information on the concepts, objectives, applications, and methods of creating a capital budget, sales budget, and administrative expenditure budget in the context of financial planning. It includes examples and formulas for calculating net present value and budget summaries.
Tipo: Resúmenes
2018/2019
1 / 9
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INSTITUTO TECNOLÓGICO DE HERMOSILLO
DEPARTMENT OF INDUSTRIAL ENGINEERING
HOMEWORK NAME:
CHAPTER
CLASS:
FINANCIAL PLANNING
TEACHER:
GROUP:
PERIOD:
AUGUST-DECEMBER 2018
STUDENT NAME:
CONTROL
NUMBER
NAME SIGNATURE
Financial Planning
FINANCIAL PLANNING FINAL PROJECT CHAPTER 1
1.1 Capital Budget: Concept Also called Investment Project, is the process of planning and administration of investments in fixed assets or in the design of methods and procedures necessary to produce and sell long-term assets of the company. Through this process, the managers of the organization try to identify, develop and evaluate the investment opportunities that can be profitable for the company. Objective The preparation of the capital budget is important because the expansion of assets usually involves very large expenses and before a company can spend a large amount of money, it must have enough and available funds. Therefore, a company that contemplates a larger program of capital expenditures should establish its financing several years in advance so that the required funds are available. Applications It offers the possibility of making important changes in the means of production, by being able to reorient the investment policy in different ways: growth, reduction, diversification, restructuring. -Related with the above, offers the possibility of influencing the current market of the company.
- Provides the possibility of radically changing the financial policy of the company.
Methods and Examples Suppose we must decide if a special edition of shoes of the 'x' brand should be made. Projected product flows are $ 20,000 in the first year, $ 40,000 for the next two years, and $ 10,000 for the fourth year. Starting this project will cost $ 50,000 and 'x' requires a 10% return. After four years ’x ' will stop producing the shoes and will not sell them anymore, because the model will be old. Solution: VPN = - 50,000 + (20,000 / 1.10) + (40,000 / 1,102) + (40,000 / 1,103) + (10,000 / 1,104) VPN = - 50,000 + 18,181.8 + 33,057.9 + 30,052.6 + 6,830.1 VPN = $ 38,122.4 The project's VPN is positive, so you qualify to invest in it (if you can only invest in a project) if there are no others with a higher VPN.
1.2 Sales Budget: Definition
PV = 40,000 (1 + 0.20) (1 + 0.10) (1 + 0.05)
PV = 40,000 (1.20) (1.10) (1.05)
PV = 55440.
THE BUDGET SALES SUMMARY
Actual sales of the previous year $ 40,
- FV, for contracts and special orders $ 40,000 * 0.20 = 8000 = budget with VF
- FE, due to inflation and devaluation Monet. $ 48, $ 48,000 * 0.10 = 4800 = budget with FE $ 52,
- FA, production policy change $ 52800 * 0.05 = 2640 = BUDGET SUAMRIO DE SALES $ 55440
1.3 Budget of Administrative Expenditure: Definition It is the set of expenses incurred in the general direction of a company not related to a specific activity of the same, as in the case of sales or manufacturing activities. Applications The estimation of administrative expenses is usually made based on the analysis of the lines of the previous year's expenses and the plans foreseen for the budgeted year. This estimate must be adjusted taking into account the criteria set by the management's policy regarding increases or decreases in the different items. Objectives Within the items that comprise the administration expenses, we can mention the following: Salaries Taxes Insurance
Depreciation Office maintenance Stationery and office items, among others.
Example
1.4 Productio n Budget: Definition The production budget is a financial plan used by manufacturing companies to obtain an estimate of the amount they must produce. In this sense, it is the delimitation of the quantity of products to be manufactured during the budgeted period and under certain conditions. Objective The purpose of the production budget is to help establish a balance between the quantities that are produced and those that are sold, so it collects and expresses how many units of product must be manufactured to cover the expected sales and on the other hand which are the needs of the inventory. Methods and Applications To make a production plan correctly, it is necessary to adopt policies linked to the search for efficiency and stability of the production process, since in order to obtain positive results in the market, it is essential to pay the same attention to inventory and production. The bases to carry out this budget successfully are: Determine and express the number of finished products, the total production need.
Units to be produced: 15, Quarter IV Units you expect to sell: 11, Units expected to be in the final inventory: 2, Total: 13, (Less) units already existing in the inventory: 4, Units to be produced: 9, Year Units you expect to sell: 47, Units expected to be in the final inventory: 2, Total: 49, (Less) units already existing in the inventory: 8, Units to be produced: 41,
1.5 Operating Budget. Definition The operating budget is that which includes the planning of the company's activities for a period of time that, in most cases, covers one year. Objective In the vast majority of companies, the budgeting phase begins with the extrapolation of the sales budget or collections from previous years, analyzing the market, both demand and supply, the trend of the economy. You also have to take into account the budget of previous years' expenses and see to what extent they can be reduced in the future. Applications A good forecast through an operating budget is vital because: The rest of the company's budgets depend on it. A large number of exogenous variables intervene, not controllable by the company. To establish a correct operating budget, it is necessary to have previously carried out a correct operations plan that allows us to know all the needs for the correct operation of the company's production. Methods For the preparation of an operating or forecast budget, it is necessary to take into account:
- (^) The raw materials budget (MMPP)
- The direct labor budget (MOD)
- The manufacturing overhead budget (GGF) Example
1.6 Balance Point: Definition
Balance point is a concept of finance that refers to the level of sales where fixed and variable costs are covered. This means that the company, at its point of equilibrium, has a benefit that is equal to zero (it does not earn money, but it does not lose either). Objective The equilibrium point estimate will allow a company, even before starting its operations, to know what level of sales it will need to recover the investment. If it does not cover the costs, the company must make modifications until reaching a new equilibrium point. Applications The costs must be classified: Fixed costs: They are those that invariably cause any level of sales. Variable costs: Are those that are made proportionally with the level of sales of a company.
Example