Qualification - OTHM Level 5 Diploma In Accounting And Business

Unit Name - Financial Planning and Control

Unit Reference Number - M/617/3297

Assignment Title - Financial Planning and Control

Learning Outcome 1: Understand corporate governance in relation to financial planning and control.
Learning Outcome 2: Understand the financial management environment.
Learning Outcome 3: Be able to assess potential investment decisions and global strategies.


This report focuses on the facts of financial control and planning in the industry with respect to the environmental financial management and corporate governance. The financial planning and control evaluation of global strategies and probable investment decisions of the organisations and the corporate governance with respect to financial control and planning is explored

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Evaluating the realistic implications of compliance with the legal framework

The organisation follows the policies, processes and complex rules through the process called legal compliance which regulates the practices of business in the specific jurisdiction. The organisation can establish the legal framework through the underlying points

The employees to be educated on the policies

Deployment of efficient compliance policies
Finding the issues which may roll into probable violations and making sure that there is existence of proper policies and procedures in place to resolve the problem

Various rules and regulations are to be informed through which the organisation should fulfil across the entire control in which the organisation functions and residing alongside of any sort of modifications

Application of Code reporting requirements
Through the employment of best practices as the base, the code of corporate governance specifies the expectation standards for the boards of corporate in safeguarding the investments of the shareholders. The code denotes the good practices standards with respect to board development, board composition and remuneration

Accountability arrangements
For an organisation and for the society, the accountability is essential. To experience the outcomes for the activities or the performance, the accountability is required of the organisation department and the individuals
Without the accountability, it is complex to find individual to imagine ownership of the independent activities as they consider that the individuals may not encounter any consequences. To arrange for the accountability
Fix measurable and clear expectations or goals
Hire individuals who can undertake responsibility
Authority is to be delegated
Review and measure the results
Deficiencies are to be addressed

Risk management and control

The aim of risk management and internal control is to make sure that the organisation functionalities are efficient that the other information along with financial information is reliable and that the organisations obey with the operating principles and the relevant regulations

Remuneration to the Board
The remuneration of the board directors of the organisation are compensated through the salary, fees or through the property of the organisation with the proper approval from the board of directors and shareholders

Understanding the interest of the shareholders and communication with stakeholders
In the simplest way, the plan of stakeholder's communication specifies the list of members to be communicated with, the frequency of communication, the matter related to communication, the way employed to perform the communication. It is not considered as the organisational business plan even though the plan may assist to attain some sort of the goals of the organisational business

Corporate Financial Objectives Impact
The enterprise proprietors specify various objectives types which includes financial objectives to offer them a rigid plan to move towards the success in the long term process. In general, the objective of financial business incorporates the maximization of profit margin, maximization of revenue, earning the returns from the investment and saving money in times of hardship
Resolving the conflicts among the stakeholders

• Early addressing the conflicts
• Looking forwards the relationship among the problems
• Behind the stakeholder's perspective, uncover the motivations
• Indulge senior management
• Employ various routes and communication forms
• Approach from different groups of stakeholders and solicit agreement to objectives

Investigating the probable investment decisions and available strategies to the business organisation

While investigating the probable investment decisions, the factors which are influencing the investments are to be analysed which includes

The cost of borrowing i.e. interest rates
Changes in demand i.e. economic growth
Expectations or confidence
Finance availability from banks
Capital productivity i.e. technological developments
Government policy, inflation, wage costs, depreciation and others

Techniques for Investment Appraisal
The techniques for investment appraisal includes internal rate of return, payback period, accounting rate of return, net present value and profitability index. These techniques are mainly employed to evaluate the new project performance. Prior to initiating the new project, the first question which comes to the mind is whether the new project is profitable or viable one? The investment appraisal techniques answer the above question. All the techniques appraises the project from the various perspective and offers a various knowledge

Payback Period
The payback period is the one of the simplest techniques of investment appraisal. It specifies the time period it takes to generate the enough cash flow for the project to cover the project initial cost
The merit of payback techniques is
Its easiness to understand and calculate
The people from non finance background can understand easily.
The demerit of payback techniques is
It avoids the value and time of money and
It avoids anything which occurs subsequent to the payback point

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For an instance

Payback period = Investment required / Net annual cash inflow
To calculate the payback period of machine A which cost $25,000 and the annual cash inflow of the machine is $10,000 then decide whether the machine is the be purchased or not if the highest payback period of the company is 3 years
Payback Period = 25,000/ 10,000= 2.5 years which is desirable

ARR - Accounting Rate of Return Method

It is an accounting method to appraise the profit margin anticipated from the investment. It represents the profit of net accounting through the investment from the capital investment percentage. It is termed as the return on capital or the return on investment. The ARR formula is represented as
ARR = (Avg. Yearly profit after tax / initial investment) x 100

For an instance
A company wishes to replace the old machinery by selling it for $10,000 with the new one which costs $360,000 to increase the annual revenue by $150,000 and the yearly operating expenses by $60,000.

To compute ARR = $150,000- ($60,000+$30,000) = $60,000 /
($360,000-$10,000) = $350,000
= 17.14%

NPV - Net Present Value
Among the investment appraisal, NPV is the most common method. It is the addition of discounted future cash outflow & inflow related to the project.. In general, WACC weighted average capital cost is the factor discounting for the future cash flows in the method of net present value. The organisation must accept the project if the value of net present is positive. In significance, the methods adds from the investment discounted net cash flows through the least required return rate and subtracts the initial investment to offer the net present value
The NPV formula is represented as
NPV = {+ + ...) minus initial investment

For an instance
In case the security provides a collection of cash flows with a $ 50,000 as NPV and an investor pays $50,000 exactly for it, then the NPV of the investor is $0. It denotes the investor earn the discount rate whatever it is on the security

IRR - Internal Rate of Return Method

This technique is the rate of discounting which offers the discounted future cash flow at equivalence with the initial investment. This discounting rate represents the organisation in which the organisation will neither make profit nor make the loss

It is the result of trial and error technique. The IRR is the rate in which the new project NPV will be zero. The current cash inflow value - current cash outflow value = 0

For an instance
The net annual cost saving is $1,500 which is equal to revenue and hence it is treated as net cash inflow and the required investment is $8,475 which will lost for 10 years and the expected rate of return is 15 % , then the IRR is calculated as Net initial investment / Annual cash inflow =$8,475 / $1,500 = 5.65
When the rate of return for the factor 5.65 is located, it shows 12%, which is not acceptable as it is less than 15 %

Profitability Index
It represents how much the organisation can get per dollar of investment. The current anticipated future cash flow value / initial outflow offers the project PI - Profitability index. This technique is considered as the easiest investment appraisal technique. In case the PI is greater than 1, the project must be accepted and in case the PI is lower than 1, it must be rejected. In case the complication is reduced, it is none other than the different representation of NPV

For an instance
When a company is doing project with the expense of $50 million which is anticipated to make future net cash flows with the $65 million present value then required to calculate PI
PI = Future net cash flows PV / Initial Investment needed PI
= $65 M / $50 Management = 1.3

Impact of Tax on appraisal methods
Decisions on the investment are significant for the business as they represent the survival of future and organisation growth. The key aim of the business is improving the wealth of the shareholders
The technique to deal with uncertainties and risk can be done through estimating the potential value for the consequences. The tax rate in the high marginal can discourage saving, time, work, innovation and investment, while particular tax preferences can influence the economic resources allocation. However, the tax cuts will reduce the economic growth in long run through maximizing the deficits

The determination of the cash present value for the high risk investments is termed as the risk adjusted rate of discount. It represents the needed periodical returns through investors for drawing funds to the particular property. It is calculated generally as the total of risk premium and risk free rate. The decision over leasing or buying the project lies with numerous factors like asset required duration, the returns generated on the asset by the business, asset type and related technological developments, etc.
Asset replacement is a non cheaper decision and the organisation evaluates the NPV of the potential cash outflows and inflows to develop purchasing decisions. When an asset is procured, the organisation finds the asset constructive life and downgrade the assets cost over the constructive life

Capital rationing is the restrictions placing act on the new projects or investments amount undertaken by the organisation. It is done through imposing huge money of investment capital consideration or through representing a ceiling over the particular budget portions

Evaluating the way the global financial environment influences the strategies and decisions for the business organisation

The business can select to operate or globalize in various nations in 4 various manners through investment, trade, licensing or franchising and strategic alliances. The decisions of strategic are the decisions which are related to the complete environment in which the organisation works, the complete people and the resources who develop the organisation and interact among the two
The capital budgeting is significant as it develops measurability and accountability. The process of capital budgeting is an assessable way for the organisational business to find the long term financial and economic profitability of any new project investment. The decision of capital budgeting is both an investment and financial commitment. The main aim is to maximize the wealth. Generally the investors spend in company shares which offer capital admiration to one side from the normal income from the dividend. Each investor has general aim with relation to the capital investment. The investment on capital is the money procurement through the organisation in order to expand its business objectives and goals. The capital investment also denotes the organisation long term assets acquisition like manufacturing machinery and plants, real estate

When the global sourcing strategy development are considered, there are 4 aspects which includes scope of operations, competitive advantage, resource allocation and synergy

The management of scope of operations ranges throughout the organisation. The function of operation incorporates various interlinked activities like capacity planning, forecasting, scheduling, assuring quality, inventories management, employee's motivation, deciding upon the spot to allocate facilities, etc. The resources allocation, productive assets apportionment among various uses. The allocation of resources emerges as an issue as the society resources are in supply of limited one whereas the human resources needs are unlimited usually and any specified resource can have various optional uses.

The advantage of competitive denotes to the aspects which permits the organisation to produce services and goods better or more economically that its competitors. These aspects permit the effective entity to create superior margins or more sales when related to its market competitors

Synergy represents the cooperation or interaction which offers rise to the complete one which is higher than the individual sum of its divisions. It represents the group activity that is working together to attain more advantage and profit than performing as an individuals


The business aims in performing the potential investment decision to increase the shareholders wealth through procuring assets and offering profit. The various measures which offer the organisation estimate over various investment projects. The investment decision can be made through net present value, payback and IRR method. To make probable decisions, proper screening and analysing, monitoring and post audit has to be done. The potential investment decisions can be influenced through the underlying factors
Market forecast
Management outlook
Opportunities through technological changes
Cash flow budget
Competitor strategy
Economic incentives and various non economic factors
Determine the right mix of investments
Develop and maintain an emergency fund
Circumstances which lead to fraud must be avoided
Occasionally consider the rebalancing portfolio
Maintain comfort zone in taking risk


This report explores the evaluation towards the realistic implications of compliance with the legal framework and investigation towards the probable investment decisions and available strategies to the business organisation at last focused on the evaluating the way the global financial environment influences the strategies and decisions for the business organisation.







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Learning Outcomes- The learner will:

Assessment Criteria- The learner can:

1. Understand corporate governance in relation to financial planning and control.





Explain the role and purpose of corporate governance for organisations in relation to financial obligations.

Assess the practical implications of compliance with the legal framework.

2. Understand the financial management environment.





Outline the economic environment for businesses. Explain the role of financial and money markets. Analyse the sources of business finance.

Assess the risk involved in a range of sources of finance.

3. Be able to assess potential investment decisions and global strategies.




Analyse the potential investment decisions and strategies available to a business organisation.

Assess how the global financial environment affects decisions and strategies for a business organisation.

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