The Financial Forecasting of Riordan Manufacturing

Table of contents

Managerial finance focuses on theories and procedures in a firm’s management that will benefit its owner. There are many economic issues like the general change in economic condition that has increased the complexities and role of managerial finance function. This paper focuses on Riordan Manufacturing, Inc. A Strategic plan is a long-term plan that envisions the firm’s future plans for the next five to ten years. Economic forecast on the other hand is based on the recent records of a firm- its sales trends and economic prospects report. An operating budget is required in order to run a project.

Cash Budget shows a cash flow of the firm for a certain period. Other terms are further discussed in the paper. Strategic planning plays as an important role in the maximization of shareholder’s wealth. Factors like risk and timing are carefully considered and associated for the expected earnings per share in the next five to ten years. Strategic planning can help maximize the shareholder’s benefit or his wealth in such a way that it can be planned how the available resources will be efficiently used in the future years.

In making assumptions for cash budgets, cash discounts should be reflected; the portion of total sales transacted on a cash discount basis should be indicated. Bad debts are also ignored, but by reducing accounts receivable collections, they can be worked in the forecast. Depreciation schedules, which reflect actual depreciation charges for existing and expected facilities, are worked up separately. Finally, the computation of tax figures is connected with the profit plan. For a better understanding, the elements of Master Budget are discussed below.

Elements of Master Budget Sales Forecast

In order to make a possible estimate of the sales, sales forecasting is done. This includes the process of analyzing and organizing information. There are certain factors that can affect the sales forecast. Some external factors are: seasons, special events, weather, consumer earnings and change in population. Some internal factors are: price changes shortage and labor problems.

Master Production Schedule

Master production schedule operates at an amassed level and is cost driven. It attempts to meet its requirement at a least amount. This is developed for the purposes of production, inventory and the like.

“It has as input a variety of data, e. g. forecast demand, production costs, inventory costs, etc and as output a production plan detailing amounts to be produced, staffing levels, etc for each of a number of time periods”

Operating Expense Budget

An operating expense budget allocates the production budget to different departments like human resources, advertising and marketing, manufacturing and so on. A large company basically needs a large Operating Expense Budget.

Cash Budget

Cash budget serves as a basis for an operation. It allows verification on what one would do to the cash an individual have. In order for a certain operation to be possible, a cash budget is needed. It also determines whether the cash is being used efficiently. For small businesses, cash budget is vital. It determines its status to the customers before it begins to have liquidity problems

Capital Expenditure Budget

It is a plan prepared for a specific project. The time p needed for this budget is determined by the project itself. “Capital expenditures to be budgeted include replacement, acquisition, or construction of plants and major equipment”. Budgets and financial forecast are useful in the administration of cash and marketable securities, it also helps identify the firm’s needs and resource requirements, and finally, in profit planning. In the budgeting process for the most recent fiscal report, the annual sales were divided to monthly figures. The Economic forecast became useful in such a way that economical issues are addressed and considered in budgeting. It serves as a basis for the analysis of the whole fiscal budget.

In the 2005 fiscal budget, it can be seen that there are increase in the payment for direct labor for the month of October, November and December. By subtracting the payment for direct labor for the month of October 2004 from that of November 2004, we obtain the amount $108,994. 2, and by doing the same process, for the months of November and December, 2004 respectively, it will result to an amount of $325,926. We can say that this increase in labor cost is reflected by the increase in economy as stated in the economic forecast.

The issues affecting the finalization of the fiscal budget for 2005 are those concerning the real GDP growth, value of dollar, inflation, labor cost, and interest rates. Discussed above are the issues in a more detailed manner. Real GDP Growth When the real GDP decreases, there will also be a decrease in the estimation of the company’s economic growth. Among the specific factor are the increase in oil price and the persistent trade deficit.

Value of Dollar

The said persistence in the in trade deficit will not only affect the estimation of economic growth, but also, it will cause an impact on the value of dollar. The trade deficit is caused by the relatively strong economy of the United States and the weaker economies of most of the company’s trading partners.


The increase in oil prices and the decrease in the value of dollars are events that brings threats of an expected inflation. Although there is a decline in the rate of labor productivity, financial managers should secure the relatively good condition of productivity gains.

Labor Cost

If the economy continues to grow, it has a great impact on any firm. An event like this will require an increase on the wages.

Which pertains to the payment for Direct Labor Cost. In some cases, the company should adjust on situation like this. Financial managers should consider the number of laborers that they have. Interest Rates Interest rates are affected by low market labor, wage increase that will cause an expected suffering of aggregate demand, increase in domestic and foreign prices. Regarding this issue, financial managers should soon secure the expansion of operations, replacement of equipment, and other purposes.


Beasley, J. E. (n. d). Master production schedule. Retrieved March 15, 2008 from http://people.brunel. ac. uk/~mastjjb/jeb/or/masprod. html.
Brigham, E. F. (1992). Fundamentals of financial management. USA: The Dryden Press. Canada Business. (September 5, 2007). Sales Forecast. Retrieved March 15, 2008 from http://www. canadabusiness. ca/servlet/ContentServer? pagename=OSBW/CBSC_WebPage/CBSC_WebPage_Temp&cid=1102940227898 Capital Expenditure Budget. (n. d. ).
Dictionary of Accounting Terms. Retrieved March 15, 2008, from Answers. com Gitman, L. J. , M. D. Joehnk, &G. E. Pinches. (1985). Managerial finance. New York: Harper and Row Publishers.

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with My Homework Geeks
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Customer reviews in total
Current satisfaction rate
3 pages
Average paper length
Customers referred by a friend
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat
Live ChatWhatsApp