In general usage, a financial plan is a comprehensive evaluation of an individual's current pay and future financial state by using current known variables to predict future income, asset values and withdrawal plans. This often includes a budget which organizes an individual's finances and sometimes includes a series of steps or specific goals for spending and saving in the future. This plan allocates future income to various types of expenses , such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan is sometimes referred to as an investment plan, but in personal finance , a financial plan can focus on other specific areas such as risk management, estates, college, or retirement.
26-415: In business, " financial forecast " or "financial plan" can also refer to an projection across a time horizon, typically an annual one, of income and expenses for a company , division, or department; see Budget § Corporate budget . More specifically, a financial plan can also refer to the three primary financial statements ( balance sheet , income statement , and cash flow statement ) created within
52-479: A business plan . A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company. Note that the financial plan may then contain prospective financial statements , which are similar, but different, to those of a budget . Financial plans are the entire financial accounting overview of a company. Complete financial plans contain all periods and transaction types. It's
78-495: A " corporation , partnership , association, joint-stock company , trust , fund , or organized group of persons , whether incorporated or not, and (in an official capacity) any receiver, trustee in bankruptcy, or similar official, or liquidating agent , for any of the foregoing". Less common types of companies are: When "Ltd" is placed after the company's name, it signifies a limited company, and "PLC" ( public limited company ) indicates that its shares are widely held. In
104-414: A balance sheet. A financial plan is a combination of the individual financial statements and reflect all categories of transactions (operations & expenses & investing) over time. Some period-specific financial statement examples include pro forma statements (historical period) and prospective statements (current and future period). Compilations are a type of service which involves "presenting, in
130-400: A combination of the financial statements which independently only reflect a past, present, or future state of the company. Financial plans are the collection of the historical, present, and future financial statements; for example, a (historical & present) costly expense from an operational issue is normally presented prior to the issuance of the prospective financial statements which propose
156-598: A company is a body corporate or corporation company registered under the Companies Acts or under similar legislation. Common forms include: In the United Kingdom, a partnership is not legally a company, but may sometimes be referred to (informally) as a "company". It may be referred to as a "firm" . In the United States , a company is not necessarily a corporation. For example, a company may be
182-542: A complete picture, a financial plan. A financial analyst studies the data and facts (regulations/standards), which are processed, recorded, and presented by accountants. Normally, finance personnel study the data results - meaning what has happened or what might happen - and propose a solution to an inefficiency. Investors and financial institutions must see both the issue and the solution to make an informed decision. Accountants and financial planners are both involved with presenting issues and resolving inefficiencies, so together,
208-406: A financial forecast will be the analyst's modeled prediction of company outcomes in financial terms over a given time period. For the components / steps of business modeling here, see Outline of finance § Financial modeling . Arguably, the key aspect of preparing a financial forecast is predicting revenue ; future costs, fixed and variable , as well as capital, can then be estimated as
234-436: A financial plan, the company should establish the planning horizon, which is the time period of the plan, whether it be on a short-term (usually 12 months) or long-term (two to five years) basis. Also, the individual projects and investment proposals of each operational unit within the company should be totaled and treated as one large project. This process is called aggregation. Financial forecast A financial forecast
260-405: A function of sales via "common-sized analysis" - where relationships are derived from historical financial ratios and other accounting relationships. At the same time, the resultant line items must talk to the business' operations:- in general, growth in revenue will require corresponding increases in working capital , fixed assets (see, here, owner earnings ) and associated financing; and in
286-439: A solution to said operational issue. The confusion surrounding the term "financial plans" might stem from the fact that there are many types of financial statement reports. Individually, financial statements show either the past, present, or future financial results. More specifically, financial statements also only reflect the specific categories which are relevant. For instance, investing activities are not adequately displayed in
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#1732786880281312-444: Is a legal entity representing an association of legal people, whether natural , juridical or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals. Over time, companies have evolved to have the following features: "separate legal personality, limited liability, transferable shares, investor ownership, and a managerial hierarchy". The company, as an entity,
338-432: Is an estimate of future financial outcomes for a company or project , usually applied in budgeting , capital budgeting and / or valuation . Depending on context, the term may also refer to listed company (quarterly) earnings guidance . For a country or economy , see Economic forecast . Typically, using historical internal accounting and sales data, in addition to external industry data and economic indicators ,
364-674: The Old French term compagnie (first recorded in 1150), meaning "society, friendship, intimacy; body of soldiers", which came from the Late Latin word companio ("one who eats bread with you"), first attested in the Salic law ( c. AD 500) as a calque of the Germanic expression gahlaibo (literally, "with bread"), related to Old High German galeipo ("companion") and to Gothic gahlaiba ("messmate"). By 1303,
390-437: The above outline, for financial forecasts, analysts often also use specific financial historical information, such as the 52-week high of stock prices, to augment their analysis of stock prices. ) This accounting-related article is a stub . You can help Misplaced Pages by expanding it . This finance-related article is a stub . You can help Misplaced Pages by expanding it . Company A company , abbreviated as co. ,
416-752: The form of financial statements, information that is the representation of management". There are two types of "prospective financial statements": financial forecasts & financial projections and both relate to the current/future time period. Prospective financial statements are a time period-type of financial statement which may reflect the current/future financial status of a company using three main reports/financial statements: cash flow statement, income statement, and balance sheet. " Prospective financial statements are of two types- forecasts and projections . Forecasts are based on management's expected financial position, results of operations, and cash flows." Pro Forma statements take previously recorded results,
442-557: The historical financial data, and present a "what-if": "what-if" a transaction had happened sooner. While the common usage of the term "financial plan" often refers to a formal and defined series of steps or goals, there is some technical confusion about what the term "financial plan" actually means in the industry. For example, one of the industry's leading professional organizations, the Certified Financial Planner Board of Standards, lacks any definition for
468-597: The legal context, the owners of a company are normally referred to as the "members". In a company limited or unlimited by shares (formed or incorporated with a share capital), this will be the shareholders . In a company limited by guarantee , this will be the guarantors. Some offshore jurisdictions have created special forms of offshore company in a bid to attract business for their jurisdictions. Examples include segregated portfolio companies and restricted purpose companies. However, there are many sub-categories of company types that can be formed in various jurisdictions in
494-548: The long term, profitability (and other financial ratios) should tend to the industry average; see Valuation using discounted cash flows § Determine cash flow for each forecast period for more detailed discussion, and other considerations; also Cash flow forecasting . There is an extensive literature on the accuracy of analyst forecasts of revenue, profit and share price developments of companies. In general, this literature shows that analysts do not produce better forecasts than simple forecasting models. (Additional to
520-423: The reputation of the exchange or particular market of an exchange. Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders. A parent company is a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors;
546-441: The resulting entities are often known as corporate groups . A company can be defined as an "artificial person", invisible, intangible, created by or under law, with a discrete legal capacity (or "personality"), perpetual succession , and a common seal . Except for some senior positions, companies remain unaffected by the death, insanity, or insolvency of an individual member. The English word, " company ", has its origins in
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#1732786880281572-482: The results and explanation are provided in a financial plan . Textbooks used in universities offering financial planning-related courses also generally do not define the term 'financial plan'. For example, Sid Mittra, Anandi P. Sahu, and Robert A Crane, authors of Practicing Financial Planning for Professionals do not define what a financial plan is, but merely defer to the Certified Financial Planner Board of Standards' definition of 'financial planning'. When drafting
598-408: The term "financial plan" in its Standards of Professional Conduct publication. This publication outlines the professional financial planner's job, and explains the process of financial planning, but the term "financial plan" never appears in the publication's text. The accounting and finance industries have distinct responsibilities and roles. When the products of their work are combined, it produces
624-543: The word company referred to trade guilds . The usage of the term company to mean "business association" was first recorded in 1553, and the abbreviation "co." dates from 1769. According to the Company Law of the People's Republic of China , companies include the limited liability company and joint-stock limited company which founded in the mainland China. In English law and in legal jurisdictions based upon it,
650-406: The world. Companies are also sometimes distinguished for legal and regulatory purposes between public companies and private companies . Public companies are companies whose shares can be publicly traded, often (although not always) on a stock exchange which imposes listing requirements / Listing Rules as to the issued shares, the trading of shares and future issue of shares to help bolster
676-501: Was created by the state which granted the privilege of incorporation. Companies take various forms, such as: A company can be created as a legal person so that the company itself has limited liability as members perform or fail to discharge their duties according to the publicly declared incorporation published policy. When a company closes, it may need to be liquidated to avoid further legal obligations. Companies may associate and collectively register themselves as new companies;
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