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Financial planning and projections

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Financial planning and projections

Important areas of the financial manager are the financial planning and projections. Plan and projection – the concept is not identical, each of them as a management tool performs its role.
In a broad sense financial projection is to explore possible situation of the company in the future, develop the main business strategies in the field of finance to ensure the necessary stability of the enterprise in the financing of certain expenses. Such projection is important primarily for the enterprise itself, since it indicates the way of raising capital and warned bankruptcy.
Projection the prospects of the financial condition of the company is also important to external users of economic information. These include banks, which are in the process of credit provide the financial resources of an enterprise – borrower, who is interest in the timely repayment of the loan, they have access to current financial statements of clients and opportunities for analysis and projections. According to the experience of western countries we can say that the banks held a great work on the prediction of enterprises bankruptcies.
Financial projection provides a basis for annual and long-term financial planning at the time, which can be considered suitable for a fair plan. This is usually 3-5 years in Western practice.
Financial planning it is one of the most important financial management tools. In our country, while of the previously existing sectoral management roadmap of the enterprise was prepared in 5 years by each year.
Annual financial plans approved by the enterprise itself, however were based on the control figures for the volume of products sold, the nomenclature of the major products, the amount of revenue, profitability, budget payments, which brought to the parent organization of enterprise and are consistent with. Plans were cumbersome and many of the indicators couldn’t be effectively used in management. Such an approach of planning don’t make it such a management tool in the modern sense, therefore, it is so interesting and important to study the accumulated global experience in financial planning and projection. It should be borne in mind that a single system of corporate planning doesn’t exist, financial planning can be considered only as a whole, highlighting the only good experience that can be used in Russian conditions. Some modern methods of financial planning is already used in some domestic enterprises.


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