FINANCIALPLANNING 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