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Mohamed Dahlan Ibrahim, Ph.D

Associate Professor
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Úo enable students to prepare relevant
statements for the financial plan.
Úo enable students to develop the skills
of preparing a financial plan.
Úo help students in evaluating the
financial viability of the proposed
business/project.

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A financial plan is a plan that shows the
short and long-term financial
requirements in order to start a new
business or project.
It also shows how the requirements are
going to be financed (using internal and
external resources).

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A financial plan should also include the
projections of the financial statements
such as the cash flow, profit & loss and
balance sheet.
A financial plan should include some
financial analysis in order to determine
the viability of the proposed
business/project.
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Úo determine the amount of money to be
invested ƛ the project cost.
Úo identify and propose the relevant sources
of fund.
Úo ensure that the initial capital is sufficient.
Úo appraise the viability before actual
investment is committed.
As a guideline for implementation.

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minancial information is gathered through budgets.
Operational budget
Administrative budget
Marketing budget
Production budget
minancial budget
Project implementation cost
Sources of fund
Projected cash flow statements
Projected profit & loss statements
Projected balance sheet statements
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Step 1:
Prepare the project implementation cost schedule.
Prepare table of depreciation for each fixed asset
owned or purchased by the company.
Step 2:
Prepare the sources of fund to finance the project cost.
Prepare a loan amortization schedule for term loan.
Prepare a hire-purchase repayment schedule if hire-
purchase financing is used.

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Step 3:
Prepare the projected cash-flow statements (for 3
years).
mor year 1 ƛ monthly.
mor year 2 and 3 ƛ annually.
Step 4:
Prepare projected trading, profit & loss statements
(for 3 years).
mor manufacturing companies, include
manufacturing accounts.

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Step 5:
Prepare projected balance sheet
statements (for 3 years).
Step 6:
Perform relevant financial analysis based
on the projected financial statements.

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 refers to the
total costs (short & long-term costs) needed
to implement the proposed business/project.


  
 refer to capital expenditure
required to buy fixed assets (ex. land, building,
machinery, equipment, furniture and vehicle).

  
 refer to expenditure to finance
day-to-day operation of the business (ex. raw
materials/inventory, wages & salaries, utilities and
other overheads.
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èapital Expenditure
Land
Building
Renovation
Machinery & Equipment
murniture & mixtures
Vehicle
Working èapital ( _xx month)
Administrative
Marketing
Operation
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Pre-operational costs
Business registration & licenses
Legal fees
Road tax & insurance
Stamp duties etc.
Deposits
Rental
Utilities
Provision for contingencies
(2 to 10 percent)
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RM RM
Capital Expenditure
Land & Building 45,000
Machinery & Equipment 23,000
Furniture & Fixtures 7,000
Van 25,000
Renovation 4,000 104,000
Working Capital (1 month)
Administrative 8,000
Marketing 1,500
Operation 8,000 17,500
Other Expenditures
Pre-operational costs 2,700
Deposits 800 3,500
Total Cost 125,000
Allowance for contingencies (10%) 12,500

Total Project Cost 137,500

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Sources of fund refer to the source

where fund to finance the project cost
is secured. It can be internally or
externally generated.

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Equity èontribution
èash
Assets
Úerm Loan
Hire-Purchase Scheme
Others

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—ource RM

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Total 137,500

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It is projected statements of cash inflows and
outflows throughout the planned period.
It shows the following:
èash inflows
èash outflows
Deficit or surplus
èash position (beginning & ending balances)

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èash Inflows
Equity ƛ cash only
Úerm-loan
èash sales
èollection of receivables
Sales of asset

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èash Outflows
Operational expenditure
Marketing expenditure
Administrative expenditure
Loan repayment
Hire-purchase repayment
Purchase of fixed assets
Pre-operational expenses
Miscellaneous expenses

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èash Surplus or Deficit
Inflows > Outflows = Surplus
Inflows < Outflows = Deficit
èash Position
Beginning cash + Surplus/
(- Deficit) = Ending cash
Note: Úhe ending cash balance for a particular
month becomes the beginning balance for the next
consecutive month

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Month Pre-Operation Jan Feb Mac Apr May June July Aug Sept. Oct. Nov. Dis. Year 1
A CASH INFLOWS
Beginning cash balance 0 30,000 30,909 31,818 32,727 33,636 34,545 35,454 36,363 37,272 38,181 39,090 39,999 0
Equity - Cash 27,500 27,500
Term-loan 45,000 45,000
Cash sales 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 240,000
B Total Cash Inflows 72,500 50,000 50,909 51,818 52,727 53,636 54,545 55,454 56,363 57,272 58,181 59,090 59,999 312,500
C CASH OUTFLOWS
Operational Expenditure:
Raw materials 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Direct labor 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Operational overheads 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Marketing Expenditure:
Sales commission 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Entertainment allowance 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Adminstrative Expenditure:
Salaries & Wages 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
EPF & SOCSO 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Adminstrative overheads 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Loan Repayment:
Principal 750 750 750 750 750 750 750 750 750 750 750 750 9,000
Interest 375 375 375 375 375 375 375 375 375 375 375 375 4,500
Hire-purchase repayment:
Down payment 5,000 5,000
Principal 333 333 333 333 333 333 333 333 333 333 333 337 4,000
Interest 133 133 133 133 133 133 133 133 133 133 133 137 1,600
Capital Expenditure:
Machinery & Equipment 23,000 23,000
Furniture & Fixtures 7,000 7,000
Renovation 4,000 4,000
Pre-operational Expenditure 2,700 2,700
Deposits 800 800
D Total Cash Outflows 42,500 19,091 19,091 19,091 19,091 19,091 19,091 19,091 19,091 19,091 19,091 19,091 19,099 271,600
E Cash Surplus/(Deficit) 30,000 30,909 31,818 32,727 33,636 34,545 35,454 36,363 37,272 38,181 39,090 39,999 40,900 40,900
F Ending cash balance 30,000 30,909 31,818 32,727 33,636 34,545 35,454 36,363 37,272 38,181 39,090 39,999 40,900 40,900

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Beginning cash balance 0 40,900 77,000
Equity - Cash 27,500 0 0
Term-loan 45,000 0 0
Cash sales 240,000 276,000 317,400
 

      
 
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Operational Expenditure:
Raw materials 36,000 37,800 39,690
Direct labor 36,000 37,800 39,690
Operational overheads 24,000 25,200 26,460
Marketing Expenditure:
Sales commission 12,000 12,600 13,230
Entertainment allowance 6,000 6,000 6,000
Adminstrative Expenditure:
Salaries & Wages 60,000 63,000 66,150
EPF & SOCSO 12,000 12,600 13,230
Adminstrative overheads 24,000 25,200 26,460
Loan Repayment:
Principal 9,000 9,000 9,000
Interest 4,500 3,600 2,700
Hire-purchase repayment:
Down payment 5,000 0 0
Principal 4,000 4,000 4,000
Interest 1,600 1,600 1,600
Capital Expenditure:
Machinery & Equipment 23,000 0 0
Furniture & Fixtures 7,000 0 0
Renovation 4,000 0 0
Pre-operational Expenditure 2,700 1,500 1,500
Deposits 800 0 0
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It is a projected statement which shows the
expected profit or loss throughout the
planned period (3 consecutive years).
mor manufacturing companies, they should
first prepare the manufacturing account.
mor trading companies, they should first
prepare the trading account.
mor service companies, they can just prepare
the profit and loss account.

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2  
Opening stock (beginning of year)
Add: Purchase of raw materials (for the year)
Minus: èlosing stock (end of year)
  

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Indirect materials
Indirect labor
Depreciation on plant, machinery & equipment
Maintenance
Utilities


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Add: Beginning work-in-process
Minus: Ending work-in-process





 

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Sales (as forecasted) Sales (as forecasted)
èost of Goods Sold èost of Goods Sold
Opening stock for finished Opening stock for
goods finished goods
Add: èost of goods Add: Purchases for the
manufactured year
Stocks available for sale Available stocks for sale
Minus: èlosing stock for Minus: èlosing stock for
finished goods finished goods
Gross Profit Gross Profit

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Sales Sales
Less: èost of Goods Sold Less: Expenses
Gross Profit Administrative
Less: Expenses
Marketing
Administrative
Operational
Marketing
minancial minancial
Depreciation charges Depreciation charges
Other expenses Other expenses
Net Profit Before Úax Net Profit Before Úax

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 $
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It is a projected statement which shows
the financial position of the company at
a specific point in time in terms of
assets owned and how those assets are
financed.
Projected statements are prepared for
the period of three (3) years.

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$
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mixed Assets
List all fixed assets at its book value (èost ƛ Accumulated
depreciation)
èurrent Assets
List all current assets (e.g. cash, stocks, account receivables,
deposits etc.)
Equity
Equity contribution (cash + assets) plus net profit
(accumulated)
Long-term Liabilities
Úerm-loan (year end balance)
Hire-purchase (year end balance)

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Fixed Assets
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Total Assets 139,900
Equity

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Long-term Liabilities
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Total Equity & Liabilities 139,900

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Fixed Assets
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Total Assets 136,900
Equity

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Long-term Liabilities
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Total Equity & Liabilities 136,900
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Total Assets 133,900
Equity

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Total Equity & Liabilities 133,900

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