E3 Financial plan Flashcards
Define financial plan
Different sets of information from a financial and accounting perspective in
respect of a new or existing business-related venture.
Purpose of a financial plan(3)
- Analysis of financial feasibility , profitability and sensitivity of a venture.
- Determine funding requirements (lenders or investors).
- Benchmark for future reporting and performance management.
Components (10)
- Historical financial statements
- Projected statements of Income and Financial position
- Cash flow projections
- Financial ratio analysis
- Notes and supporting documents
Including… - Assumptions applied in projections
- Cash flow deficits
- Working capital
- Break-even analysis
- Contingencies
Define scenario development process
Possible visualised futures to assist an organisation in conceptualising
future conditions, external to the scope of statistical forecasting.
What does VUCA stand for, and define each component.
- Volatility
- the rate, amount and magnitude of change - Uncertainty
- amount of unpredictability inherent in issues and events - Complexity
- amount of dependency and the interactive effect of multiple factors and drivers. - Ambiguity
- degree to which information, situations and events can be interpreted in multiple ways.
Difference between scenarios and forecasts.
Forecasts assume that it is possible to predict the future.
Scenarios are more process driven and accept the fact that the future cannot be predicted.
Characteristics of a poorly designed scenarios
-Key assumptions were not comprehensively evaluated.
-If not enough expertise was used the quality of the scenarios is substandard.
-Scenarios may be biased
-Lack of creativity and imagination in the scenario process.
Characteristics of a good scenario
-Plausibility
-Alternatives
-Consistency
-Problem solving
-Competitiveness
