Republic of the Philippines

Department of Education
Region III
SCHOOLS DIVISION OF ZAMBALES
Zone 6, Iba, Zambales
Tel./Fax No. (047) 602 1391
E-mail Address: zambales@deped.gov.ph
website: www.depedzambales.ph

Name: ______________________________________ Grade/Section__________

School: _____________________________________ Date: __________________

LEARNING ACTIVITY SHEET

BUSINESS FINANCE
Financial Planning Tools and Concepts
Quarter 1 - Week 3
I. Introduction
In our situation today, COVID-19 pandemic makes us realize that
proper planning, proper budgeting, and cash management are very
important tools for us to survive. Most of Filipinos lost their jobs; most
businesses were not able to sustain which led them to declare bankruptcy.
Economy in this time of pandemic was down.
In this chapter you will learn and understand more on financial planning
process, budget preparation, and cash management. You, as a student of Senior of
High School will learn and, as you go along, will apply these topics in your real life.

II. Learning Competency

The learners shall be able to:

- identify the steps in the financial planning process - ABM_BF12-IIIc-d-
10
- illustrate the formula and format for the preparation of budgets and
projected financial statements - ABM_BF12-IIIc-d-11

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III. Objectives:

At the end of this learning activity sheet, you are expected to:
1. analyze the importance of planning;
2. differentiate strategic planning and tactical planning;
3. familiarize with the tools used in budgeting.

IV. Discussion
Do you have an idea on how you see yourself five years from now? As an
Accountancy, Business and Management (ABM) student, will you be a business
owner? An accountant? Or a manager?
If you are not sure yet on what you want five years from now, maybe you are
still in the process of planning.
Planning is an important aspect of the firm’s operations because it provides
road maps for guiding, coordinating, and controlling the firm’s actions to achieve
its objectives. Management planning is about setting the goals of the organization
and identifying ways on how to achieve them. The same is true with financial
planning.
There are two phases of financial planning. Financial planning starts with
long term plans which would then translate to short term plans.

Strategic vs. Tactical Planning

Long-term financial plans or the strategic plans are a set of goals that lay
out the overall direction of the company. A long-term financial plan is an integrated
strategy that takes into account various departments such as sales, production,
marketing, and operations for the purpose of guiding these departments towards
strategic goals. Those long-term plans consider proposed outlays for fixed assets,
research and development activities, marketing and product development actions,
capital structure, and major sources of financing. It also includes would be
termination of existing projects, product lines, or lines of business; repayment or
retirement of outstanding debts; and any planned acquisitions.
Short-term financial plans or the tactical plans specify short-term
financial actions and the anticipated impact of those actions. Part of short-term
financial plans include setting the sales forecast and other forms of operating and

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financial data. This would then translate into operating budgets, the cash budget,
and pro forma financial statements.

The Financial Planning Processes

There are six steps in financial planning process
Step 1: Determine Your Current Financial Situation
In this first step of the financial planning process, you will be able to
know your current financial situation about income, savings, living expenses,
and debts. Preparing a list of current asset and debt balances and amounts
spent for various items gives you a foundation for financial planning activities.

Long-Term Planning Short-Term Planning

Persons More participation from Top management is still involved but there is
Involved top management more participation from lower level managers
(production, marketing, personnel, finance,
and plant facilities) because their inputs are
crucial at this stage since they are the ones
who implement these plans
Time 2 to 10 years 1 year or less
Period
Level of Less More
Detail
Focus Direction of the company Everyday functioning of the company

Step 2: Develop Financial Goals

You should regularly figure out your financial values and goals. This
involves determine how you feel about money and why you feel that way. The
purpose of this analysis is to classify your needs from your wants. Specific
financial goals are vital to financial planning. Your financial goals can range
from spending all your current income to establish an extensive savings and
investment program for your future financial security.

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Step 3: Identify Alternative Courses of Action
Developing alternatives is crucial for making good decisions. Although many
factors will influence the available alternatives, possible courses of action
usually fall into these categories:
 Continue the same course of action
 Expand the current situation
 Change the current situation
 Take a new course of action
 Not all these categories will apply to every decision situation; however,
they do represent possible courses of action
 Creativity in decision making is vital to effective choices

Step 4: Evaluate Alternatives

You need to evaluate possible courses of action, taking into consideration
your life situation, personal values, and current economic conditions.
Consequences of Choices. Every decision closes off alternatives. For
example, a decision to invest in stock may mean you cannot take a vacation. A
decision to go to school full time may mean you cannot work full time.
Opportunity cost is what you give up by making a choice. Decision making will
be an ongoing part of your personal and financial situation. Thus, you will need
to consider the lost opportunities that will result from your decisions.
Evaluating Risk. In many financial decisions, identifying and evaluating
risk is difficult. The best way to consider risk is to gather information based on
your experience and the experiences of others and to use financial planning
information sources.
Financial Planning Information Sources. Relevant information is
required at each stage of the decision-making process. Changing personal,
social, and economic conditions will require that you continually supplement
and update your knowledge.

Step 5: Create and Implement a Financial Action Plan

In this step of the financial planning process, you develop an action plan.
This requires choosing ways to achieve your goals. As you achieve your

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immediate or short-term goals, the goals next in priority will come into focus. To
implement your financial action plan, you may need assistance from others. For
example, you may use the services of an insurance agent to purchase property
insurance or the services of an investment broker to purchase stocks, bonds, or
mutual funds.

Step 6: Re-evaluate and Revise Your Plan

Financial planning is a dynamic process that does not end when you
take a particular action. You need to regularly assess your financial decisions.
Changing personal, social, and economic factors may require more frequent
assessments.
When life events affect your financial needs, this financial planning process will
provide a vehicle for adapting to those changes. The figure below represents the
financial planning processes.

Determine
current
financial
situation
Figure 1: The
Re-evaluate
and revise the Develop Financial
plan financial goals
Planning
Process

Create and Identify

implement a alternative
financial action course of
plan action

Evaluate
alternatives

Source:
(http://novella.mhhe.com/sites/0079876543/student_view0/senior_experience999/your_financ
es19/financial_planning.html. Retrieved August 21, 2020)

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 In planning, the goal of maximizing shareholders’ wealth must always be
put in mind. Therefore, the following criteria must be used for an effective
planning:
Specific – target a specific area for improvement.
Measurable – quantify or at least suggest an indicator of progress. Assignable –
specify who will do it.
Realistic – state what results can realistically be achieved, given available
resources.
Time-Related – specify when the result(s) can be achieved.

Doran, G. T. (1981). "There's a SMART way to write management's goals and

objectives". Management Review (AMA FORUM) 70 (11): 35–36.).

What is your idea about the following questions?

1. What is a budget?
2. What is the importance of a budget?
3. What will happen if the budget is not met?

Cayanan, A. (2015) said, a plan is useless if it is not quantified. A

quantified plan is represented through budgets and projected or proforma
financial statements. These budgets and pro-forma financial statements are
useful for controlling. They serve as the bases for monitoring actual
performance. Meeting the plans is good. However, failing to meet the plans is
not equivalent to failure if the reasons for not meeting such plans can be
justified especially when the reasons are fortuitous in nature and are beyond
the control of management. Measuring actual performance vis-à-vis the plans
even at the early start of the year allows the management to assess the
company’s performance and come up with remedial actions if warranted.

The Sales Budget

This is how a sales budget is formulated. The most important account in
the financial statement in making a forecast is sales. To forecast means is to
plan beforehand. Since most of the expenses are correlated with sales, the sales

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budget is formulated. Financial Statement analysis discussed in your
Accounting subjects that cost of sales ratio, gross profit ratio, and variable
operating expenses ratio are based on the sales figure. Given the importance of
the sales forecast, the financial manager must be able to support this figure
with reasonable assumptions.

SALES BUDGET
Formula: Forecasted unit sales x Price per unit= Total gross sales
The following external and internal factors should be considered in forecasting
sales:
External Internal
• Gross Domestic Product (GDP) growth • production capacity
rate • manpower requirements
• Inflation • management style of managers
• Interest Rate •reputation and network of the
• Foreign Exchange Rate controlling stockholders
• Income Tax Rates •financial resources of the company
• Developments in the industry
• Competition
• Economic Crisis
• Regulatory Environment
• Political Crisis
Table 1: Factors that Influence Sales

External Factors
Macroeconomic Variables. Macroeconomic variables such as the
GDP rate, inflation rate, and interest rates, among others play an
important role in forecasting sales because it tells us how much the
consumers are willing to spend. A low GDP rate coupled by a high
inflation rate means that consumers are spending less on their
purchases of goods and services. This means that we should not forecast
high sales of the periods of low GDP

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 Developments in the Industry. Products and services which have
more developments in its industry would likely have a higher sales
forecast than a product or service in slow moving industry. Consumer
trends are always changing; thus the industry should be competitive to
be able to appeal to more customers and stay in the market.
Competition. Suppose you are selling bread and you know that
each person in your community eats an average of one loaf of bread a
day. The population of your community is 500 people. If you are the only
person selling bread in your town, then your sales forecast is 500 units
of bread. However, you also have to take account your competition. What
if there are 4 other sellers of bread? You will need to have to divide the
sales between the 5 of you. Does this mean your new forecast should be
100 units of bread? Not necessary. You should also know the preference
of your consumers. If more of them would prefer to buy more bread from
you, then you should increase your sales forecast.

Internal Factors
Production Capacity and manpower. Suppose that you have
already evaluated the macroeconomic factors and identified that there is
a very strong market for your product and consumers are very likely to
buy from you. You forecasted that you will be able to sell 1,000 units of
your product. However, you only have 20 employees who are able to
produce 20 units each. Your capacity cannot cover your expected
demand hence, you are limited by it. To be able to increase capacity, you
should be able to expand your operations.
There is an implication if sales budget is not correct. If
understated, there can be lost opportunities in the form of forgone sales.
If it is too optimistic, the management may decide to unnecessarily
increase capacity or hire more employees and end up with more
inventories

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 Production Budget
What a production budget is and how it is formulated? A
production budget provides information regarding the number of units
that should be produced over a given accounting period based on
expected sales and targeted level of ending inventories. It is computed as
follows:
Required production in units = Expected Sales + Target
Inventories – Beginning Inventories

Note: Ending inventory of current period is beginning inventory of

next period.
Let us have the following examples: Company A forecasts sales in
units for January to May as follows:
Jan Feb Mar Apr May

Units 2,000 2,200 2,500 2,800 3,000

Moreover, Company A would like to maintain 100 units in its

ending
inventory at the end of each month.
 Beginning inventory at the start of January amounts to 50 units.
 How many units should Company A produce to fulfill the expected
sales of the company?
The answer is here:
Jan Feb Mar Apr May Total

Projected Sales 2,000 2,200 2,500 2,800 3,000 12,500

Target level of ending inventories 100 100 100 100 100 100

Total 2,100 2,300 2,600 2,900 3,100 12,600

Less: beginning inventories 50 100 100 100 100 50

Required production 2,050 2,200 2,500 2,800 3,000 12,500

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Budgeting Cash
Operations budget refers to the variable and fixed costs needed to run
the operations of the company but are not directly attributable to the
generation of sales.
Examples of this are the following:
Rent payments; Wages and Salaries of selling and administrative
personnel; Administrative Costs; Travel and representation expenses;
Professional fees; Interest Payments, and Tax Payments

Cash Budget
 For a business enterprise, having the right amount of cash is
important since cash is used to make payments for purchases, for
operational expenses, to creditors, and for other transactions.
 The cash budget, or cash forecast, is a statement of the firm’s
planned inflows and outflows of cash. It is used by the firm to
estimate its short-term cash requirements, with attention being
paid to planning for surplus cash and for cash shortages (Gitman
& Zutter, 2012).

V. Activities

A. True of False
Direction: Write True if the statement is correct, write False if the statement is
incorrect. Write your answer in your activity notebook.

1. Long-term financial plans or the strategic plans are a set of goals that lay out
the overall direction of the company.
2. Long-term financial plans or the tactical plans specify short-term financial
actions and the anticipated impact of those actions.
3. Planning is an important aspect of the firm’s operations because it provides road
maps for guiding, coordinating, and controlling the firm’s actions to achieve its
objectives
4. Measurable quantify or at least suggest an indicator of progress.

10
5. Planning is a statement of the firm’s planned inflows and outflows of cash.
6. Inflation, interest rate, income taxes are internal factors that influence sales
7. Realistic state what results can realistically be achieved, given available
resources.
8. Operations budget refers to the variable and fixed costs needed to run the
operations of the company but are not directly attributable to the generation of
sales.
9. Macroeconomic variables such as the GDP rate, inflation rate, and interest rates,
among others play an important role in forecasting sales because it tells us how
much the consumers are willing to spend.
10. A Sales budget provides information regarding the number of units that should
be produced over a given accounting period based on expected sales and targeted
level of ending inventories

B. Multiple Choice
Direction: Choose the letter that corresponds to the correct answer. Write your
answer in your activity notebook.
1. Why do many small businesses do not use budget?
a. Small business do not record variances
b. Budgeting can be time consuming
c. Budgeting is for large firms only
d. all of the above
2. What is a sales budget?
a. A plan of how much an item will cost
b. A plan for how much money should be made in a given period
c. A plan of items to be sold
d. A plan for tracking an inventory and how much they sell
3. Which of the following is NOT a benefit of budgeting?
a. It promotes study, research, and focus on the future
b. It is a source of motivation.
c. It prevents company to incur net losses
d. It is a means of coordinating business activities?

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4. Which of the following statements about budgeting is incorrect?
a. A budget looks back and review performance
b. Budgets motivate staff
c. A budget is a financial plan.
d. Budgets provide direction and coordination.
5. Which of the following is normally prepared first?
a. Production Budget b. Cash Budget
c. Sales Budget d. None of the above
6. What is the formula for computing production budget?
a. Expected Sales in Units + Beginning Inventory in Units + Planned Ending
Inventory Units
b. Planned Ending Inventory Units + Beginning Inventory in Units – Expected
Sales in Units
c. Expected Sales in Units + Target Ending Inventory Units – Beginning
Inventory in Units
d. None of the above
7. Which of the following is NOT a motive for budgeting according to Bible’s
teaching?
a. Stay out of debt b. Buy the things I want
c. Buy the things I need d. Have enough to give
8. Why are budgets useful in the planning activity of an organization?
a. Budgets help communicate goals and provide a basis for evaluation
b. Budgets guarantee the company to be profitable if it meets the objectives.
c. Budgets provide management with information about the company’s past
performance.
d. Budgets enable the budget committee to earn paycheck
9. What is budgeting?
a. A plan made in advance regarding the expenditure of money based on
available income.
b. Having enough money to buy something.
c. Having ability to pay bills on time
d. Having money left over at the end of the month.
10. What is the purpose of a budget?

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 a. Helping spend wisely b. Estimating income and expenses
c. Saving for future expenses d. Increasing income

C. Fill in the Blank

Direction: Identify the following. Write your answer in your activity
notebook.
1. _____ provides information regarding the number of units that should be
produced over a given accounting period based on expected sales and targeted
level of ending inventories
2. ______ a step of the financial planning process, that will let you know your
current financial situation about income, savings, living expenses, and debts.
3. ______ a step of the financial planning process, that should regularly figure out
your financial values and goals. This involves determine how you feel about
money and why you feel that way.
4. _______ is to gather information based on your experience and the experiences
of others and to use financial planning information sources.
5. ______ is a statement of the firm’s planned inflows and outflows of cash
6. ______ is an important aspect of the firm’s operations because it provides road
maps for guiding, coordinating, and controlling the firm’s actions to achieve its
objectives
7. ______ is a set of goals that lay out the overall direction of the company
8. ______ specify short-term financial actions and the anticipated impact of those
actions
9. _______ is the formula for sales budget
10. ______ specify when the result(s) can be achieved

13
 D. Word Search Puzzle
Direction: Search words that are related to the lesson discussed. Write
your answer in your activity notebook.

E. Crossword
Direction: Analyze the puzzle. Use the clues provided beside the puzzle.
W
r Across

2. road maps guiding and controlling

i
3. when the result can be achieved
t
5. specify who will do it
e 6. tactical plans

7. target specific area of improvement

y 9. quantify or suggest indicator of progress

Down
o
1. statement in forecasting sales
u
4. number of units to produced
r 8. results realistically be achieved

answer in your activity notebook.

VI. Assessment
Direction: In your activity notebook, make at least ten (10) sentences on
the topic below.

14
 Discuss long-term or strategic financial plans and short-term or
tactical financial plan in your own understanding.
VII. Reflection
Direction: In your activity notebook, make an essay on the topic below.

In our situation today, how are you going to apply planning and
budgeting in your family?

Rubrics for assessment and reflection

Areas of 5 4 3 2
Assessment
Ideas Presents ideas in an Presents ideas in a Ideas are too general Ideas are vague or
original manner consistent manner unclear

Organization Strong and Organized Some organization: No organization;

organized beg/mid/end attempt at a lack beg/mid/ end
beg/mid/end beg/mid/end
Understanding Writing shows strong Writing shows a clear Writing shows adequate Writing shows little
understanding understanding understanding understanding

https://www.thoughtco.com/essay-rubric

VIII. References

Cayanan, A. & Borja (forthcoming). Business Finance. Quezon City.

Rex Bookstore.

Gitman, L. J. & Zutter C. J. (2012), Principles of Managerial Finance

(13th Ed), USA: Prentice-Hall

Teaching Guide for Senior High School, Business Finance, Published

by the Commission on Higher Education, 2016

http://novella.mhhe.com/sites/0079876543/student_view0/senior_e
xperience999/your_finances19/financial_planning.html (Retrieved
August 21, 2020)

https://www.thoughtco.com/essay-rubric
https://wikifinancepedia.com/finance/six-steps-in-financial-
planning-process-examples. (Retrieved August 21, 2020)

15
 16
IX. Key to Corrections
Activity A Activity B Activity C
True or False Multiple Choice Fill in the blank
1. True 1. b 1. Production Budget
2. False 2. d 2. Determine your current
3. True 3. c financial situation
4. True 4. b 3. Develop financial goals
5. False 5. c 4. Evaluating risk
6. False 6. c 5. Cash budget
7. True 7. b 6. Planning
8. True 8. a 7. Long-term or strategic plan
9. True 9. a 8. Short-term or tactical plan
10. False 10. b 9. Forecasted Unit Sales x Price per unit
= Total gross sales
10. Time-related
Activity D Activity E
Word Search Puzzle Crossword Puzzle
1. Inflation 1. Sales budget
2. Tax Payment 2. Planning
3. Competition 3. Time-related
4. Interest rate 4. Production budget
5. Planning 5. Assignable
6. Wages 6. Short-term
7. Income tax 7. Specific
8. Production budget 8. realistic
9. sales 9. measurable
10. long-term
For Assessment and Reflection, use provided rubric in checking student activity
(For teacher’s copy only. Don’t include this part in the distribution)
SNHS - Senior High School, Subic District
Teacher III
MARIA AMOR L. AGUDO
Prepared by: