P2.

2:

Financial planning: is also called capital plan, is an evaluation of the

aggregate capital needs of the company, it tell us the frugal sources,
how to use it in profitably way, and it shows us the future of the
financial activity of the company.

Financial planning is one important element of the financial

management (FM), and we can define it: is the management of
financial of a business.

Financial planning help business to achieve the goals they wants,

because it affects on the business on effectively way, to establish,
maintain, and expand.

-There are three types of financial planning:

1. Short term: it furnisher for one year
2. Medium term: it furnisher from one to five years.
3. Long term: it furnisher more than five years.

-The importance of financial planning:

1.
2.
3.
4.
5.
6.

Forecast of cash flow and profits.

Raising the finances.
Managing cost, funds, flow of internal funds, and assets.
Facilitate pricing of the product and cost control.
Miscellaneous importance.
Measuring required returns.

-Financial Planning is a mathematical sum of following parameters:

Financial planning= Financial Resources (FR ) + Financial Techniques
(FT)

P2.3:

There are two types of users for making decision for business:
1. Internal users
2. External users
INTERNAL USERES:
1)-Stake holders:
an accountant, group, organization, member, or system that affects or
can be affected by an organization's actions
2)-Employees:
They are concerned about what the salaries they will take and about
the avails of the work, also they care about the condition of work.

3)-Managers:
An individual who is in charge of a certain group of tasks, or a certain
subset of a company. A manager often has a staff of people who report
to him or her.
As an example, a restaurant will often have a front-of-house manager
who helps the patrons, and supervises the hosts; or a specific office
project can have a manager, known simply as the project manager.
Certain departments within a company designate their managers to be
line managers, while others are known as staff managers, depending
upon the function of the departmen

EXTERNAL USERS:

1)-Creditors:
A party to whom money is owed.
Common classifications of a creditor include (1) Secured: who has
a legal right to take a specific property of the borrower and sell it in
case of a default. (2) Unsecured: who does not have any such right. (3)
Preferential or senior: who takes precedence over other creditors in
laying claim to a bankrupt borrower's property. (4) Junior: whose claim
is addressed after satisfying the claims of preferential or senior
creditors.

2)-Customers:
A party that receives or consumes products (goods or services) and
has the ability to choose between different products and suppliers. See
also buyer.
2.Quality control: Entity within a firm who establishes
the requirement of a process (accounting, for example) and receives
the output of that process (a financial statement, for example) from
one or more internal or external suppliers.

3)-Investor group:
They can be probable and existing shareholders. The equity investors
care about two elements to their investment, Income in the form of
dividends and gain in the share price.

4)-The Bank:

a financial establishment that uses money deposited by customers for

investment, pays it out when required, makes loans at interest, and
exchanges currency..

5)-The Government and tax authorities:

They need to know if the business is direct their legal duties, for baying
tax for them, and Financial Statement give them good idea about how
much they should to baying.

6)-Suppliers:
s an enterprise that contributes goods or services. Generally, a supply
chain vendor manufactures inventory/stock items and sells them to the
next link in the chain. Today, the terms refers to a supplier of any good
or service..
P2.4:

-Ordinary shares:
These shares can be spread to people for company whose shares are
reciprocal on the stock exchanges

-Debentures:
Is given of the balance sheet in equity and liability part, the benefits
paid on debentures is shortage from profit before tax is charged.

-Loan:
is a debt provided by one entity (organization or individual) to another
entity at an interest rate, and evidenced by a note which specifies,
among other things, the principal amount, interest rate, and date of
repayment. A loan entails the reallocation of the subject asset(s) for a
period of time, between the lender and the borrower..

-Bank over draft:

A bank overdraft is a limit on borrowing on a bank current account.
With an overdraft the amount of borrowing may vary on a daily basis.
Abank loan is a fixed amount for a fixed term with regular fixed
repayments. The interest on a loan tends to be lower than
an overdraft. Example of a loan
-Retained earnings:

The percentage of net earnings not paid out as dividends, but retained by
the company to be reinvested in its core business, or to pay debt. It is
recorded under shareholders' equity on the balance sheet.
The formula calculates retained earnings by adding net income to (or
subtracting any net losses from) beginning retained earnings and
subtracting any dividends paid to shareholders

-Sale of fixed assets:

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures
a company's ability to generate net sales from fixed-asset investments - specifically
property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset
turnover ratio shows that the company has been more effective in using the
investment in fixed assets to generate revenues.

P2.1:

Explanation

Amount to be
raised

Option 1

Option 2

Option 3

(40% / 60%)

(50% / 50%)

(60% / 40%)

100000

100000

100000

40000

50000

60000

60000

50000

400000

22000

22000

22000

9400

7700

6000

12600

14300

16000

9450

10725

12000

4000

5000

6000

2360

2145

Equity

Debts

EBIT

Interest rate

Earnings after
interest rate
Earning after
interest rate
and taxation
(25%)
Number of
shares

Earning / share

We choose option 1, because it is a higher Earning / share.

P3.1:

Fixed Budget

Actual Budget

Out Put
1150 units

1150units

115000

113500

46000 (46000meters)

46300 (46300meters)

23000 (5750hours)

23200 (5920hours)

20000

19300

26000

24700

Sales

Raw Material

Labor

Fixed Over head

Net Operating Income

1 Sales Volume Variance:

Is the measure of change in profit or contribution as a result of the
difference between actual and budgeted sales quantity.
(2000 favorable)

2 Sales Price Variance:

The sales price variance reveals the difference in total revenue caused by
charging a different selling price from the planned or standard price.
(1500 favorable)

3 Total Direct Material Variance:

There two types of total direct material variance:

1 -Direct Material usage Variance:

The difference between the amount of materials, that was required to make a
product, and the amount of materials, that was budgeted to make the product.
(300 adverse)

2 Direct Material Price Variance:

The difference between the actual materials for a product cost compared to how
it was budgeted to cost.
(Zero)

4 Total Direct Labor Variance:

There two types of Total Direct Labor Variance:

1 Direct Labor Efficiency Variance:

It is a measure of difference between the standard cost of actual number of direct
labor hours utilized during a period and the standard hours of direct labor for the
level of output achieved.
(200 adverse)

2 Direct Labor Rate Variance:

It is the measure of difference between the actual cost of direct labor and the
standard cost of direct labor utilized during a period.
(680 adverse)

5 Fixed Over Head Spending Variance:

It is the difference between the actual fixed overhead expense incurred and the
budgeted fixed overhead expense. An unfavorable variance means that actual
fixed overhead expenses were greater than anticipated.
(700 favorable)

Cash Budget:

Jan

FEB

Mar

Apr

May

June

60

52

55

55

60

55

Cash
payment
To creditors

30

30

31

31

35

31

salaries

10

10

10

10

10

10

Electricity

14

Other over
head

Van
purchased

11

Cash surplus
and deficit

+18

+10

-13

+12

+13

+3

Surplus

Surplus

Deficit

Surplus

Surplus

Surplus

Receipts

Cash receipts
From
customer
Payment

Cash Balance

12+18
=
30

30+10
=
40

40-13=
27

27+12=
39

39+13=
52

52+3=
55

P3.2:

A ) Total (full) Costs :

1. In accounting, the sum of fixed costs, variable costs, and semivariable costs.
2. In the context of investments, the total amount spent on a particular
investment, including the price of the investment itself, plus
commissions, fees, other transaction costs, and taxes.

B ) Variable Manufacturing :
A cost of labor, material or overhead that changes according to the
change in the volume of production units, Combined with fixed costs,
variable costs make up the total cost of production. While the total
variable cost changes with increased production, the total fixed costs
stay the same.

Total (full) Costs Method :

Variable Manufacturing Costs Method:

Cost:

Price =

3+1+2+1.25+0.5+0.25=8

CM= target profit + Zero =

Cost*number of unit

Cost + (contribution margin * cost)

Cost =
Direct raw material + Direct labor + indirect manufacturing
cost =

160000 = 0.25
640000
= 3+1+2 = 6

Contribution margin =

Price=
8+(0.25*8)=10

Target profit +the excluded costs =

Cost * Number of units

320000 = 0.7
480000

Price=
6+(0.7*6)=10

Break Even Point Analysis:

An analysis to determine the point at which revenue received equals the costs
associated with receiving the revenue. Break-even analysis calculates what is known
as a margin of safety, the amount that revenues exceed the break-even point. This is
the amount that revenues can fall while still staying above the break-even point.

Break even- point (units)

Break- even point (pounds)

Fixed cost _____________________ =

Selling price variable cost (cm (unit)

Fixed cost =
Cm ration

60000 = 21818 unit

2.75

60000
0.28

214285

P3.3:

-Pay Back period:

It is a length of time we need it to investment for recover the initial
outlay in terms of profit or saving, it is one of the simplest investment
appraisal techniques.

-Account rate of return (ARR):

DEFINITION OF 'ACCOUNTING RATE OF RETURN ARR'

The amount of profit, or return, that an individual can expect based on an
investment made. Accounting rate of return divides the average profit by
the initial investment in order to get the ratio or return that can be expected.
This allows an investor or business owner to easily compare the profit
potential for projects, products and investments

-Net Present Value:

DEFINITION of 'Net Present Value - NPV'

The difference between the present value of cash inflows and the present value of
cash outflows. NPV is used in capital budgeting to analyze the profitability of an
investment or project.

Project A:
1 Pay Back Period :
60000 = 30000 + 30000 = 60000 (2 years)
2 Accounting rate of return (ARR):
= Average accounting income * 100%
Average investment
-Depreciation expenses:
= initial investment scrap value =
Number of years
= 60000 4000 = 56000 = 11200
5
5
a) Average coconut income:
18800 + 18800 + (-1200) + (-3200)
5
= 32000 = 6400
5
b) Average investment:
Initial investment + scrap value = 60000 = 32000
2
2
6400 * 100% =20.3%
32000

3 Net Presented Value:

NVP=c+

cf
(1+ R)t

Year1= 26785
Year2= 23915
Year3= 7117
Year4= 6355
Year5= 2269
Scrap Value= 2269
-60000 + 68710 = 8710

Project B:
1 Pay Back Period :
80000 = 35000 + 30000 + 15000 = 80000 (2.6 years)
2 Accounting rate of return (ARR):
-Depreciation expensive:
= initial investment scrap value =
Number of years
= 80000 6000 = 74000 = 14800
5
5

a) Average account income:

20200 + 15200 + 15200 +(-4800) + (-2800)
5
= 43000 = 8600
5
b) Average investment :
Initial investment + scrap value
2
= 80000 + 6000 = 43000
2
= 8600_ * 100% = 20%
43000

3 Net Present Value:

Year1 = 31250

Year2 = 23915
Year3 = 21353
Year4 = 6355
Year5 = 3404
Scrap value = 3404
NVP=c+

cf
(1.12)5

-80000 + 89680 = 9681

We choose project B, because it is a higher NPV