Question

• Describe the meaning and the components of a financial reporting system.
• Explain the budget process.
• Describe a budget contingency plan.
• Give an example of financial guidelines that ICBI should follow to successfully plan for finance management.
  • Identify and describe at least 5 basic financial guidelines.

Answer 1

Financial Reporting System is the means of guidance by which the management team can have an idea about the financial standings in the near future or current state. usually with the help of an excel.

Budget Process

Processing of the required spending over a future time by each department inside a company with justifiable proof based on past spending and future inflation. It will presented to the top level and needs to approved to have a budget. Usually it will be have once a year in a detailed way and 5 year plan in a brief.

Budget Contingency plan

the best way to have a foolproof is to considered more than one financial ratio. The available ratios includes IRR, EBIT, EBITDA,P/E,ROCE,NPV. Based on the size of the company and the nature of the product, we should carefully select the ratios required.

i would suggest to refer IRR and EBITDA for ICBI, IRR should be 10% or more, which ensure the return of the investments done and combined with EBITDA 15% or above, this needs to be referred to have the knowledge about the profit which the ICBI will have before spending on the Interest,tax and depreciation.

5 Basic Financial guidelines.

1, Know all the costs, and record all, don't ignore any while budgeting

2. Have a standard rule, and never deviate

3. Keep check on the interest rate, and tax

4. Have a monitoring system on the spending, least a monthly report on the performance

5. Track your net worth, and see the performance and compare it with the market