FINANCIAL

PLANNING AND
FORECASTING
Planning and forecasting
◦ Budgeting of Activities
◦ Forecast volumes
◦ Forecast Sales and Cost
◦ Forecast expenses
◦ Balance Sheets
Case Study
Sagan Limited are one the major apparel producers located in Faisalabad. Management is
striving hard to keep the pace of business and achieve growth of 20% per annum. They
believe in the philosophy of planning hence they plan their activities regularly. Currently they
are in planning phase of 3rd quarter of 2017 and anticipating the following:
◦ Expected sales of July, Aug and Sep will be 1,000,000, 1,100,000 and 1,300,000 respectively.
◦ Fixed Cost per month will be 300,000 per month while the VC is 27% of selling price.
◦ Estimated selling expenses are 2% of sales of july and eventually will be increase by 0.2%
per month.
◦ Rent Expenses are 50,000 per month while Admin expenses for May are anticipated at Rs
125,000 per month and eventually increase by 1% per month.
◦ The Co has obtained cash financing facility of Rs 500,000 @ 8% per annum. Interest to be
paid on monthly basis.
◦ Tax rate 33% per annum.
◦ Required: Forecast PNL of Sagan Limited for 3rd quarter.
Waqas Ahmed and Co providing you the following information.
Forecasted Opening Cash Balance - 1st April 2017 30,000

Estimated Sales Feb-17 100,000 May-17 100,000

Cash Sales 20% Mar-17 120,000 Jun-17 120,000
Apr-17 130,000 Jul-17 120,000
Collection Policy 50% after one month of sales and balance in subsequent month

Purchases of
materials Feb-17 50,000 May-17 70,000
Mar-17 60,000 Jun-17 50,000
Apr-17 75,000 Jul-17 80,000
50% after one month of purchase and balance in subsequent
Payment Policy month

Other Cash receipts & payments Month Receipts Payments

Apr-17 15,000 5,000
May-17 70,000 7,000
Jun-17 50,000 2,000
Required: Prepare Cash Budget for SECOND quarter of 2017
Case Study
Iqra Corporation a leading Since company is continuously incurring loss
garment manufacturers dealing in hence Management hired a consultation to over
all kind of bathroom accessories. come losses. The consultant proposed the
During the year 2016 their PnL following
statement showing the following
data: (all data in million of rupees) ◦ Launch new category of bathrobes and towels
Sales 35.58 ◦ Automation of process
Less Expenses ◦ Reduction of redundancies from process and
Raw Material 7.42 reduce staff counts.
Staff Cost 4.48 It is estimated that above measure will increase
Op Expenses 20.40 capacity utilization uptob 80%, reduce staff cost
by 15% however fixed cost increase by Rs 1.2
Interest 2.00
Million.
Depreciation 2.00
Required:
The plant is working on 60%
capacity and 20% operating ◦ Forecast PnL for 2017.
expenses are variable. ◦ As a consultant what are the other proposals
you propose to overcome losses.
Case Study
Apollo Hospital deals in all kinds of Knee Surgeries having ISO certifications with experienced staff. They
are planning to open another Surgery suite with state of the art facilities. All construction work
completed and project is ready to inaugurate. CFO prepared the following data for BoD.
Type of patient Expected # of patient ALOS % selection of Room
Pvt S/P General
◦ Medical Treatment 10,000 6 10% 50% 40%
◦ Surgery 1,100 12 20% 70% 10%
◦ Room Charges 10,000 5,000 2,500
Operating Room Charges are Rs 200 per clinical staff per minute while the Surgery Charge will be Rs
100,000 per surgery. Based on past experience, the following is the breakdown of the types of
operations performed.
Type of Operation Expected # of Op Avg # of Min per Op Avg # of staff Req
Minor 600 60 3
Major 500 120 6
Required:
◦ Calculate the expected revenue from new suite for 2017.
◦ Do you agree with the pricing mechanism devised by CFO? If no then suggest the other mechanism