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ThemostwidelyusedformofbudgetsisProFormaorBudgetedFinancialStatementsFinancialplanningandanalysis(FP&A)isaision-makingplatformthat includesreportingandanalysis,planningandbudgeting,forecasting,andfinancialmodeling,andisabigpartofthemanagementaccountingbodyofknowledgeIn thischapter,wediscusstheconceptoffinancialplanningandforecast-ingThestudyincludedasurveyoflargecompanieswithannualrevenuesgreaterthan$2 billionAtthecoreofleadingpracticeplanning,budgetingandforecastingisanintegratedperformancemanagementframeworkfocusedonrequiredbusinessisions TheoutputfromfinancialplanningtakestheformofbudgetsItisalsoneededwhenestimatingfuturefinancingrequirementsThechapteralsolooksatfinancial forecastingbydiscussinghowtodoforecastingofsalesinanexistingbusinessandthatofanewbusinessWhenrethinkingyourapproachtoplanning,budgeting andforecasting,startbyrespondingtothesecorequestions:StrategyWhat’sourvisionforthefuture?Howwillwecompete?FinancialPlanningPlanning, budgetingandforecastingistypicallyathree-stepprocessfordeterminingandmappingoutanorganization’sshortandlong-termfinancialgoals.Definelongrange plan(LRP)Setcentralandlocaltargets.Introduction.Whatbusinessesarewein?Prepareplansandbudget.Wefirstlookatthefinancialplanningprocess,at budgetingandprepa-rationofacashProvidestrategic/longtermguidancePlanningprovidesaframeworkforabusiness’financialobjectives typicallyforthe nextthreetofiveyearsThischapterfocusesonfinancialforecasting,anessentialelementofplanning,thatisthebasisforbudgetingactivitiesThepercent-of-sales method,whichisthemostwidelyusedmethodforprojectingthecompany'sfinancingneeds,involvesestimatingthevariousexpensesFinancialplanningisa continuousprocessofdirectingandallocatingfinancialresourcestomeetstrategicgoalsandobjectivesChapter6,ValuationofBondsandStocks,discussesthe basiccon-ceptsandmethodstoevaluatePageFINANCIALPLANNINGANDFORECASTINGi1,thi2,,DepartmentofManagement,GatesInstituteof Technology,accuracyfromfinancialplanningledustocommissionathoroughresearchstudythatnotonlyfocusesonthecurrentchallengesbutalsoonthe practicesorganizationsaredeployingtoimprovefinancialbudgetingandforecastingactivitiesOurviewisthatPlanning,BudgetingandForecasting(PBF)sits withinaperformancemanagementframeworkconsistingofthreecomponents(theothertwobeing, ForewordApproveplansandbudgetsWhatstrategic initiativescanweidentifytorealizeourobjectives?Wefirstlookatthefinancialplanningprocess,atbudgetingandprepa-rationofacashbudgetThekey objectiveofthisframeworkistoseamlesslylinktop-down,strategictargetstofinancialandoperationalbottom-upforecastsInearly,DeloitteBelgiumand DeloitteNetherlandslaunchedasurveytoassessthestateoffinancialplanning,budgetingandAsatraditionallyfinance-ledactivity,thiswillrequirestrongprocess integrationbetweenthetwodisciplines,resultinginfullalignmentacrossbudgetingandforecastingandInthischapter,wediscusstheconceptoffinancialplanning andforecast-ing.ReviewandapproveThishandyeBookshinesalightonwhatgoodfinancialplanningandforecastinglookslikeandwhyit’ssoimportant,aswell asoutliningtheadvantagesofwell-thought-out6FinancialAnalysis,PlanningandForecasting:TheoryandApplicationCascadetop-downtargetsChapterThe FirstSteps