 Hello everyone, we are back from the break. So what I am going to do is before we actually start corporate financial planning I know there are a lot of questions before the break before we actually went for break. So I want to devote first 15 minutes for questions around personal financial planning and budgeting and then we can begin the corporate financial planning session. Please if any of the institute or centers have any question kindly raise your hand so that we can accordingly choose your specific center and you get an opportunity to ask the question. Thank you. Yes. 1001. 1001. Maulana Azad Institute. Do you have any question? Ok. We will move to other institute. Walchand Institute any question? Good afternoon sir. Good afternoon. Actually I got question when you are explaining that Marshal Herarchi actually according to my religion what they teach us that after completing your basic needs you must help to others means if we have the money after completing your basic needs that food, shelter and all we should help other people because sir in India we see lot of poverty is there, lot of poor people are there so which we can help. Actually sir my question is in that herarchie I was finding that where can I place that helping hand to others where can I place that at what level I can place that. So it was it is probably the second one which is nothing but once you have satisfied your basic needs you can take care of safety of others which includes your family friends and relatives. So it is up to an individual to define what is my family right. My family could be 100 people staying close to me I could define them as my family. So if that is that if I have that kind of strength probably I can cater to all those 100 people in my specific way I will be able to help them. So it will depend from an individual's capacity how much he or she can help and that is what I would say. Thank you sir actually I was expecting this thing from you and my main motive behind asking this question was because I do not know who are listening this question and all I just wanted to remind or to recall this point to all of the student that not only being successful as our own because this society this is also this is also one of the main things on all of the which is in hand of all of us youngsters just I want to remind this and sir I want to appreciate you that the thing in video lectures also you given as you clear as all the concepts with the help of that example that one story grass offers and one end. Sir I want to suggest you that please continue with this style only because we are from IT background so I am from IT department second year so we can understand very easily if you explain us by this example set home maker example you given so thank you very much and sir please continue with this time sure that is the reason I use lot of videos and even when you will see when we are doing corporate planning and budgeting I will take some basic day-to-day example so that you understand how these concepts work thank you. Thank you. Good afternoon sir. Good afternoon. I am Vaibhavi Piraza and I have a question regarding to mutual funds. Okay. So as you are continuously suggesting us to invest in a mutual fund can you please suggest some of the mutual funds so it can narrow down our search. Okay. First of all I am not associated with any asset management company or I am not promoting any mutual fund house it is purely on the basis of knowledge that I have and it is purely on the basis of my experience now you are asking for specific mutual funds I would restrict myself please do your own research because basis my suggestion if you take any specific if you choose any specific mutual fund scheme that would not be advisable you need to identify any specific family members who are well versed with financial markets or you get in touch with a investment advisor whose primary role is to provide advice so I would strongly recommend you take that route I am not the right person to suggest you any particular mutual fund scheme. Okay thank you sir. Thank you. Sir. Hello. How does share market respond to changes in government that is government that is one question and second question. Sorry I did not get your first question. When government changes, central government changes or state government changes how does share market respond to it? Okay. And one more question is that in what situations share market collapses or raises? Okay. We need to be extremely sensitive around any questions related to politics or anything I will give you a very basic understanding of how these concepts work. So markets in India largely work on sentiments so if there is any positive news the market would appreciate if there is any negative news a market would depreciate so a particular ex-government which is ruling if there is a high probability that they will also win in a particular state election. The investors could take that news very positively and obviously the investors would buy more if they buy more obviously the markets will grow up and similarly any negative news which is expected or assumed would come out of any government policy that could have a negative impact on the stock markets. So markets more than working on the fundamentals markets in India works on sentiments so it depends upon what is what specific news is floating around in the country and how markets will react to it unfortunately nobody can predict it 100 percent. When stock market collapses stock market could collapse when the entire global economy is melting down a classic case is 2008 subprime crisis where all the global markets collapse because the entire real estate market collapsed and a lot of the big banks actually went bankrupt. So these kind of global trends which has impact on all the markets across the globe that could be some of the reasons which impacts or results into complete meltdown of stock markets. Can we take the next center please? Sir you are talking about the financial planning and stock market sir and my question is as a student I would like to know if you would come across another 2008. That is first of all I'm not an economist so I can't comment on it how or if ever 2008 subprime crisis would come again based on my experience and my knowledge I could say that I don't see in the near future we would see another crash but you never know financial markets are very uncertain so yeah you never know if there's a global meltdown we can see a similar situation. So I can make an assumption or I can focus but I can't make a hundred percent accurate comment that we would definitely see a 2008 similar market graph. Good afternoon sir. Good afternoon. As per the personal financial budget is concerned should it be static budget or flexible one? Can you be little slow when you're asking the question I really can't understand. Be little slow when you're asking a question. As per the personal financial budget is concerned should it be a static budget or flexible one? It should be flexible one so that you can play around with your spending as well as savings. I mean it would depend on you right if you're a person who has a defined structure for your daily, weekly and monthly expenditures probably your budget would be static but considering the kind of generation we are living into obviously this budget should be more flexible right. If there are two good movies and you want to go for both obviously there your expenditures increase would that be a static budget would you be able to restrict yourself no I've planned only one movie per month I will not go for the another movie so obviously budget has to be flexible. Thank you sir. Thank you. Can we move to the next? Okay there's a question okay there's a chat question let me just read it out for the benefit of everyone. What are the packages given in the recent budget for 2018-19 to promote savings and investments in India? See on a personal front nothing new that has been introduced in terms of promoting any savings or investments the budget offers nothing new in compared to 2017-18 on a personal on a personal individual perspective so there's nothing new to be added. The tax lab still remains the same and all the exemptions which were given by the government also remains the same. Yes good we can't hear you we can't hear you your mic is on mute sorry we can't hear you. No sir. Good would you like would like to know government are taking any steps to removing? Removing what? The gap between the private and government. Well this question is not related to this topic so you can post this on the blog and we will answer it there. Thank you. I can take one last question I have already answered the cryptocurrency one we've already taken care. Are there any additional questions? I think there were few on the chart no sorry. This is taken care. Okay randomly we can select we can take one more question before I begin the next session. Center 101-2 do you have any question? Raichun College? Okay I don't think we have any questions. Okay all right so now that we have understood personal financial planning and budgeting I would want you I would want to move your focus to corporate planning and budgeting. While the fundamental principles and concepts still remains the same a corporate financial plan helps corporate to identify three key aspects where are we now where would we like to go and how do we get there. The definition changes little bit financial planning is a process of determining how an organization plans to finance its overall operations to achieve its objectives now and in future. Now you take any organization anywhere in the world the most successful organizations in the world are those who are goal oriented. Now how does an organization boils down to certain specific goals there are two broad statement which helps any organization to define the goals that they would work to achieve. These two statements are vision statement and mission statement you would find these two statements in every organization's annual report. Mission statement talks about the present state of the organization how they currently are and vision statement talks about the future state of the organization where they want to reach or how would they like to portray themselves 5, 10, 15 or 20 years down the line. Reason I am stressing on the vision statement and mission statement is a corporate planning plan begins immediately once the organization has identified the vision and objectives that they believe in achieving. This corporate financial plan then helps the leaders of the organization to determine two things one how will they finance the overall operational activities of the organization and two what kind of investment decisions would they make which will help them to achieve the firm's strategic goals. Now for any organization this is a very critical task so who does this task in any organization the organization appoints a personal who is called as a chief finance officer the primary responsibility of this chief finance officer is to act as a captain or navigator of the ship what is the job of the captain of the ship to make sure that the ship reaches safely to the destination within a given time frame most importantly it reaches safely so that's the job of chief financial officer to ensure that an organization meet its short-term financial plans as well as long-term financial plans. Now what is the short-term financial plan a short-term financial plan would be looking at a horizon of less than one year where the whole focus is the organization should have sufficient liquidity so that they can meet all the short-term commitments that they come across within one year's time frame they should have sufficient inflow of cash to meet all their commitments and they should have sufficient liquidity so that they can perform or carry on all the activities that they have to perform so that they can keep on continuing running the business and generate revenues for the organization now if you saw in personal financial planning and budgeting we understood a financial plan is only good if it is backed by certain action same logic applies to a corporate financial plan also so here in this case all the operational activities that the organization performs acts as a driving force which enables any organization to achieve the financial goals that they have planned for themselves. Now what kind of operational cost I am referring to let's say we are talking about a manufacturing unit now a manufacturing unit would need to hire workers or employees a manufacturing unit would need to have a manufacturing plant they would need to purchase machinery they will need to spend money in terms of designing a product so all of these departments would require or they would need to incur cost to run all of these functions so all the cost which is associated for running various operations of an organization is referred to as operational cost a concrete financial plan helps the senior leaders of the organization to identify how they will be able to finance these operations now an organization could have multiple choices a they could use their own money which is shareholders money to meet any short term commitments or be they can benefit from leverage opportunities they can take loan from other banks they can take loan from other credit authorities and once they have met their requirements they can repay back these loans so all of these financial decisions are part of a corporate financial plan so how does the financial planning process works it's a four-step approach which begins with analyzing projecting deciding and measuring now I am going to give you a very basic example so that you can understand and appreciate these concepts in a much better way so let's say I have a restaurant business and at the moment I can only entertain people who are walking in my restaurant reason being I'm short-staffed and I don't have two wheelers so that I can take orders of home delivery so what's happening is I'm losing out a lot of business because a lot of people place orders for home delivery and since I don't have sufficient staff and I don't have the right amount of two wheelers to cater to all the home delivery orders I am losing out that business so here in an analyzing step what I will ascertain is okay I have two options out here one I I ignore completely the additional business and money that I can make by offering home delivery or two can I start home delivery service if I start home delivery service I would need to hire more people I would need to have two or three two wheelers because that will help me to expedite the home delivery and the food will reach faster to my customers now I need to analyze okay all of this would require a lot of cost that means I will need to incur cost this becomes my operational cost so I will decide okay I will take certain portion of the profits that I have made from my restaurant business from past few years and I will purchase the two wheelers with my own personal finance and I will also employ a few more employees and bear their salaries or B I can actually take a two wheeler loan on these two wheelers and I will have to pay interest amount to the bank from whom I have purchased the two wheeler loan so analysis is a step where all the financing and investment choices are open to the firm so if I look from a corporate standpoint whenever a corporates require any specific funds to meet their short term working capital requirements they would make a conscious decision taking into consideration all the cost benefit analysis should we use our own money or should we actually borrow money for a short time period once we are able to deliver our orders we will repay back that particular short term loan amount and pay interest for that time period so that's what analysis step is where all your investment options and financing options are open and you are actually analyzing all these options to understand which option makes more sense now we move on to projecting stage where what you do is you actually ascertain the future consequences of your present decisions in order to avoid any surprises now going back to my restaurant business okay I have decided that it makes sense for me to offer home delivery services now I need to ascertain I need to take into consideration okay I would probably my business would increase by 20% if I offer home delivery services but does it still make sense considering the cost that I would incur to hire more employees the investment that I'm making in two wheelers end of the day the maintenance cost and the staff salaries if it is more than the returns that I would generate from home delivery business it probably doesn't make sense for me to take that decision so projecting phase is that phase where an organization decides okay if I'm taking an x-step I need to generate some benefit or profits out of taking that particular step if it's not going to generate benefits I'm probably better off not taking that particular step so that in future you don't have any specific surprises then comes the deciding stage now you have three to four alternatives available with you you need to choose the alternative which will give you maximum returns which will help you to ensure that you achieve a particular financial goal that you're looking for so here I need to decide will I do a self-financing or would I actually go to bank to finance these particular two-wheelers measuring is the last step where you measure subsequent performance against the goals that in financial plan so once I've started my home delivery service I need to understand do I actually see increment in my profits is it over and above is it good enough to cover the additional cost that I'm incurring for additional staff whom I've appointed and the vehicle maintenance and petrol charges then I need to bear so same way organizations before taking any financial decision or once they've taken the decision they need to measure how much ROI or return on investments they were able to generate from the financial decision that they have taken so that they know that they are heading in the right direction they don't need to relook or work back on their financial decisions so this will enable them and this will give them more confidence that they are heading in the right direction and they will be able to achieve their financial goals in the long run so hope that restaurant example will help you to understand the steps which are involved in the financial planning process it begins with analyzing well all your investment and financial options are available you are simply analyzing all the options you are not favoring any of the options all the options are neutral to you you are simply analyzing which option makes more sense then you're projecting in projecting stage you're checking what would be the future consequences if I go with option A what would be the future consequences if I go with option B whichever seems more viable it makes more sense for you to go for that particular option but you need to do that homework and organizations do that homework before taking any financial decision then in the deciding stage they will eventually boil down to taking one concrete decision as they firmly believe in it it aligns with the culture of the organization and it aligns with the financial goals that they have put in for themselves in the corporate financial plan and last but not the least they need to measure the decision that I took is it actually benefiting the organization if not necessary steps needs to be taken amendment needs to be done on a timely basis so that we can make the necessary changes at the right time so what is the importance of corporate financial planning a it helps to reduce the overall risk as the firms are doing really well they will increase in size as your size increases your exposure increases as your exposure increases the risk also increases so corporate financial plan will help organizations to ascertain ok are they taking the right financial decisions have they taken the right hedge which is required to protect them from any unforeseen circumstances or events right they need to do thorough research or they need to folk they need to do lot of forecasting now what is forecasting forecasting is simply predicting for the future based on the data that you have accumulated from the past so you would have past historical trends the organization will study these past historical trends and they will accordingly ascertain what how does the future look like they would be able to make predictions are these hundred percent accurate the answer is no but it still gives the CFOs and many senior officials take concrete financial decisions as they will have more confidence because they have done a lot of homework before taking any financial decision it provides benchmark for performance management now managers if they stick to the organization's corporate financial plan they will be able to deliver results if they are able to deliver results its job of the organization to reward them back by giving them a good performance management by doing a good performance management for these managers so it acts as a benchmark which helps them to do a good performance management it sets out firms objectives to motivate employees only those organizations are successful where the individual employees goals and objectives aligned with the firms goals and objectives so if you have embedded everything in your corporate financial plan it becomes absolutely transparent and everyone or every department or function is working unitedly in unison because your entire corporate financial plan has given a framework to every department and every function and they are working accordingly so that collectively you all can achieve financial goals it assists organization is adapting change and become flexible even in the first part we saw what is very important is your financial plan has to be very flexible we are talking about changing times you need to be adaptable if you are not adaptable obviously you will be wiped off one thing to remember is change is the only constant only those organizations which are innovative enough to adapt change to mold themselves according to the present global environment will be able to survive sustain and grow it helps encourage creativity and motivate managers to take initiative yes managers if they have a clear vision with the help of a corporate financial plan they will be motivated enough to take initiatives initiatives which will help organization to achieve their financial goals much faster it helps manager management to take better quality decisions obviously this corporate financial plan has been made by considering all the risk and uncertainties there is a lot of homework done in terms of planning forecasting and budgeting so obviously it helps the senior management to take a lot of better qualitative decisions the decisions that they take would help the organization to achieve these financial goals much faster right I am going to take a pause and I am going to take few questions out here 1103 we can hear you Pankaj Namdev what is tax okay tax is a liability that be it an individual or a corporate has to pay to the government of the country in which he or she is residing now the government of any country is giving you an infrastructure a either to invest or to conduct your business so that government would then in turn want to generate some revenue because if you're talking about infrastructure development good services good infrastructure everything requires money so the only source of income for government is to collect revenues from the income that an individual or corporate has generated this comes in the form of tax so both individuals as well as corporates have to pay taxes to the government of a specific country hope that answers your question Pankaj Namdev 1 0 1 2 G N Reichen college right Sony college there's no question the inner college of engineering any questions there was a question my doubt is related to return on investment as you said earlier that for the purpose of generating revenues for an organization it is important to invest what is the better option to invest between gold bonds and marketable equities okay now if you're asking from an individual standpoint or a corporate standpoint if you're talking from a corporate standpoint a corporate whenever they are raising capital they have two options they can raise capital either through equities or they can raise capital either through bonds so when I'm talking about equities it results into dilution of ownership and when I'm talking about bonds it results into creating liabilities or creating creditors on the balance sheet now in case of equities a company or corporate would only be liable to pay to the shareholders to pay certain portion of the profits that the organization has made it purely depends upon the discretion of the board of directors but if you're talking about raising capital through bonds then in that case you have created creditors now as a creditor I am supposed to receive fixed income from these bonds so as a organization there is a liability for you to pay out regular periodic interest income to these investors so an organization or corporate would take a decision based on what is the cost of capital associated if they raise money through equity or if they raise money through bonds wherever the cost of capital would come down to be beneficial to the organization they would accordingly take that particular route to raise that capital is there a question yes sir hello I spoke about financial planning and budgeting at the personal level okay and now we are talking about financial planning and budgeting at the corporate level correct my question my question is for a finance manager of any company XYZ the function involves the he has to identify the source of funds and then he has to plan the application of funds correct and similarly or a comparison be drawn between personal financial planning and the role of a finance manager at the corporate level when he decides the application of funds does he divide it into short-term media term long-term and if he is left with certain amount of funds which are required in the future by the company how does he ensure the growth sure that so you would appreciate the fact that one is when we are comparing personal financial plan with a corporate financial plan although the fundamental concepts remain the same but the volume and sheer size of cash flows revenue numbers profit numbers are significantly different right in case of a personal financial plan you are only thinking about the goals and objectives of you as an individual but when I'm talking about a corporate financial plan in an organization there would be multiple department let's say marketing there would be a purchase department there would be a sales department there would be a research and development department all these departments would have certain specific targets of their own but collectively all of those are working towards achieving the organization's financial goals and objectives now it's the job of a chief financial officer of a or if it's a small organization let's say a finance manager to bring all these departments together and ensure that whatever budget numbers all these departments are submitting in terms of expenditures that needs to be within the budget that I have decided for the organization in entirety right so it's the job of a chief financial officer to determine okay in comparison to previous year we will work towards reducing our overall expenditure by two million dollars so all the departments would say hey out of two million dollars we would save let's say half a million dollar by taking XYZ steps department we would say we would take these steps to save down expenditure by maybe 250,000 dollars some department like research and development would say no we need to launch or we need to invest more into our research we would require more budget than the previous year so obviously from a CFO standpoint if something is increasing it has to come from other pockets so at an holistic level a chief financial officer needs to ensure that all his departments are working in unison and they are working towards achieving the firm's financial goals and objectives now a firm could have a financial goal right let's say our presence right now is only in 12 to 13 states within United States of America by next five years our retail banking presence should increase significantly in additional 10-12 states so all the departments directly or indirectly have to contribute towards this goal hope that helps thank you so much thank you so much thank you yes 1292 Sagar Institute you're on mute I can't hear you can you can you type it on the chat please I can't hear your question okay I'll come back to you 1292 yes is there any question good afternoon my question is in our daily life we use the apps such like the ATM and phone pay they're giving us 20% off 20% cashback 50% cashback but we can purchase anything product they will give us 20% 50% cashback what what is that they get profit of the ATM and phone pay so the companies which are which have tied up with these e-wallets they give significant amount of discounts because they are able to generate a lot of volumes through these apps because if you remember during demonetization Paytm was one of a lifeline for a lot of us I mean people were not even able to pay to their made salaries so Paytm came in very handy so a lot of people got used to Paytm so that gave a lot of hits to the app so the the other the other companies who actually sell or offer products they realize that Paytm is a successful app people would be able to purchase their products or would appreciate the services that are offered through Paytm so in turn they are willing to cut down or minimize on the margins and give you additional discounts you think Paytm is offering those discount but it's not Paytm it's the company who is selling the product is giving the discount to Paytm that's why Paytm is extending the discount to you but what is the planning the money what is the planning procedure of earning money that type of so I can launch the app of one app of that type of Paytm like so there are there are there are any ways many e-wallet apps which are already there in the market Moby quick is there free pay is there free charge is there Paytm is there you may want to rethink on doing something new innovative which nobody has yet offered that increases the probability of your app being successful if you're offering the same product and service how do you distinct yourself from others so obviously you will have to you will you will have to create funding for yourself to launch a platform you will need to have a plan before you can raise a funding because nobody is going to fund you if they don't believe in your plan someone needs to believe in your business model you go to a bank or you go to any angel investors any investor would ask what is your business model what kind of cash flows do you project five years down the line who would be your target audience how will the source of income come in if you're able to answer all those questions you will be able to defend your financial plan if you're able to defend your business plan or financial plan those investors or bank would invest or give money to you obviously you need to give some collateral in return nobody's going to give you money free of cost you need to place some collateral once you have identified that funding then it's going to be your research team or your coders job to make sure that you've got the app in place which can offer solutions and then it depends upon how you play and how your app gets successful thank you i'll take one more question okay there's in case of fixed deposit okay there's a question just give me one minute i'll i'll request you to wait there's a question on the chat in case of fixed deposit rate of interest is small nowadays will you please suggest schemes from government bank which gives optimal interest secure and safe okay as brutal it may sound you take any government specific investments be it national pension scheme or be it any government schemes the rate of interest would be less for a very simple reason your principal is safe and same way if i have to compare with other financial products which are not offered by government the returns are much higher because you are investing into markets so obviously you go for any product where your principal is safe your returns would be significantly less so within the basket i mean the returns would be fairly similar so it doesn't make sense to actually suggest you anything and as i told you i'm not an investment advisor so i will not be the right person to recommend you any particular financial product out here what i can tell you is i can give you information it's for you to make the right choice but i have a question regarding the previous session is an IRA a good investment individual retirement account is the is it a good investment or not it definitely is a good investment because as i told you even in the financial planning pyramid you need to take care of your retirement plan so if you think IRA could could be an answer to your retirement plan it definitely is a good investment thank you guys any specific question to corporate planning because if we are left with time we can always go back and take questions related to personal financing one two zero zero is college i can't hear you can you please your mice my closer to the mouth away i'm really sorry i can't understand what you're saying can you please keep the mic away so that i can hear you properly i i can't understand your question i'm really sorry can you put it on chat sir hi sir our question is what is the method to evaluate the investment what is the method to evaluate an investment method is fairly simple right uh let's say you invested x amount at hundred and on an annual basis that investment is fetching let's say 15 percent returns that means by the end of the year you should have 115 as an appreciated value so your actual capital gain is 15 rupees if that 15 rupees is giving you a higher return in comparison to putting your money in alternative investment that means you have made a right investment choice right but if there's another investment product which is offering you more returns but also need to factor in if the risk in the other investment product is much higher does it align with your profile if it aligns with your profile you can switch your investment to the alternative investment but if the risk profile doesn't match is you're better off with your current investment there are a lot of avenues available which can help you determine what is the current value of your investment thank you sir are there one more question sir how can we know what's the market demand and how can we analyze the business market service okay market demand again you have so many platform social media platforms you have newspapers good newspapers like economic times which will keep you well versed with what's happening in the global arena how are the global markets trending and what kind of impact would it have on the Indian markets you also need to keep a track of what are the various policies the government is focusing on what is the focus for government in the union budget that will help you to ascertain where there is significant growth which is going to happen in next five to ten years obviously your investments should be associated with those specific sectors that's where because you know there would be tremendous growth in those specific industry sectors and your investment would fetch the returns accordingly thank you sir all right i'll take one more question and we'll resume back valchin institute as you said that we uh that we should invest in mutual funds or anything so that's i want to ask that mutual fund take our money and uh invest them to the share market so why don't we need why don't we uh join the share market i'm on our side thank you so much thank you so much for asking that question uh as i told earlier also the advantage of mutual fund is it is managed by a professional fund manager who have spent years it's its primary bread and butter business to manage the funds of lakhs of people like you right and since so many people are coming together the pool of fund is also huge right so on an individual capacity maximum you will be able to invest let's say one lakh in a year but if that same amount is contributed by one lakh individuals we are talking about thousand crores which this fund manager has with this huge amount he enjoys the benefit of economies of scale that means rather than depending on the performance of 10 scripts you get the benefit of performance of thousand scripts so that way your mutual fund returns are much safe and at the same time the risk is getting diversified across thousand stocks vis-a-vis if you directly invest into the market you are purely dependent upon the performance of the 10 scripts that you have chosen for yourself if you have passion if you have time if you are really keen to make it big in the markets you need to understand the concepts really well you need to understand the stocks really well and if you think you are well prepared enough you can take the plunge and go for direct investments that's why I also decided to learn this financial literacy but really say I don't taking or I don't getting that much knowledge I'm not able to see everything investment we need to understand investment is an art it's not a science and every art takes good amount of time good amount of practice before you can master a particular art so if you think by just studying few courses in one or two months you can understand markets trust me it doesn't happen that way lot of people who have spent lots of years in the market they still can't understand how markets really operate so you need to be very well versed before taking the plunge is out what I would say sir there's one more question when I was a child since then and I am sorry but since then I also used to think that I also heard that the governments are going in laws means they don't have enough money but I always think that the money is itself printed by the government and why should don't they use their money to print and use by themselves and they can so think about it the responsibility of government is to provide infrastructure and facilities to all the residents of a particular country because we are tax paying individuals and I believe once you start earning you will also pay tax as an honest citizen of the country right so think of a government as a security guard who has key to a particular branch banks branch but obviously that guard will not just open the door and take cash out of it so same way government has the ability to print money but that ability of printing money still is reserved with reserve bank of India and reserve bank of India simply doesn't work on government's direction reserve bank of India has a governor who is competent enough to decide do we require additional printing of currency right printing of currency depends upon how what is the kind of liquidity that is floating in a particular economy if the government thinks that there is need to print additional surplus currency in the market then they will get in touch with reserve bank of India and take necessary steps yeah thank you sir so the whole intent is to control inflation rates in any economy that's where government will intervene they will either put in excess flow of funds in the market or they could squeeze in all the flow of funds from the market to control inflation what was the nature of the financial crime committed by Harshad Mehta in 1992 and how it influenced Indian stock market okay I would not comment on it obviously he actually manipulated the stock prices and that resulted into many investors losing out their hardened money right so when regulators went behind Mr. Harshad Mehta they identified there were a lot of loopholes which he took the benefit of and that's where it resulted he getting penalized that's what I can share okay let's you are on a roll third question go ahead sir actually I just want to know that if I want to join this share market then is there any site or any thing from where I can learn or understand the market easily there are multiple avenues one one you can do self-learning there are plethora of resources available on worldwide web two you can actually do internship with a small brokerage house where you actually understand the concepts of a particular market particular sector and how trades actually get executed and number three you can there are a lot of courses available on fundamental analysis and technical analysis information is available on google spend some time if you are really passionate about it thank you sir okay I will go back I have few more points to share with y'all and then we can take another question what is corporate budgeting similarly it's an estimation of revenues and expenses over a specified period of time it is compiled and re-evaluated on a periodic basis so every year an organization would compile a budget now this budget would be a culmination of numbers shared by all the various departments be it finance be it purchase department be it sales department be it research and development be it technology department all of the departments would have specific budgets they would have budgets because a they have certain headcounts which are working in the specific departments there are employees so obviously staff salaries are associated with it secondly those particular departments have certain strategic initiatives that they want to invest money into they want to probably train some of the employees which would require good amount of training costs so all of these departments would come up with a certain budget number all these budget numbers would collectively go to the chief financial officer now a CFO has to determine okay do these budget numbers actually make sense I mean all the departments have to justify their budget numbers before they are actually finalized and until and unless a budget number is not finalized any department cannot spend a single dollar out of those numbers right it is a first step to successful financial planning as it incorporates all aspects of firms operations as I told you everything that an organization does all actions are associated with operation cost so everything that we do would require financing so budgeting will help an organization to determine what is the trend of their spend versus is there any scope where they can trim down some of their expenditures can they save more so that they can invest more into various alternative investment which will help them to achieve their strategic goals budgets are an integral part of running any business efficiently and effectively an organization if they don't keep a tab of the trend of their expenditures and the future forecasted cash flows they will never be able to know what is the growth that they are going to expect in next 5 10 15 20 years so be it a personal financial plan or be it a corporate financial plan budgeting is absolutely critical it always tells us how much we can save it tells an organization where they want to focus their spending on if an organization wants to increase a market share they think probably by creating a new innovative product they will be able to capture more market share which means that they will need to focus their spending on innovation technology research and development so with the help of budget a cfo could probably understand okay there's a scope to cut down certain expenditures from certain department and probably that money can be reinvested into technology or innovative departments which will help them to achieve their strategic goal which is increasing the market share this is very important and i'm going to spend good amount of time explaining you the budgeting cycle now every organization goes through this budgeting cycle every year so this budgeting cycle has four critical steps and it begins with planning now planning is also referred to as preparation stage it is the stage at which all the departments would give their dollar numbers to the department head or functional heads that this is the budgeted numbers for the next financial year that they would require they would factor in all the assumptions like okay we have 100 employees as of today we are bringing in new functions so we would require additional 20 employees to manage those functions so those 20 employees their salaries needs to be factored in in the new year's budget so those budget numbers would be presented to the functional head these budget numbers are based on certain assumptions and these are then shared with the functional head or department heads the functional head and department head would then submit these budgeted numbers to the budgeting approval authorities or senior leadership of the organization so that leads us to the next stage which is negotiation and approval stage it is a stage where all the functional heads or department heads would need to defend their budgeted numbers so for instance if for the year 2016-17 a budget number was thousand dollars and for 17-18 if I am projecting that my budget number or my requirement would be two thousand dollars obviously we are talking about a hundred percent appreciation in your budget numbers so the approving authority would definitely ask you why do you see such an incremental increase in the overall spending so the functional head or department needs to do sufficient homework to justify these are the reasons because of which we are asking for additional budget it is this stage at which a budget number can either be approved or rejected all the budget numbers have to be approved at negotiation and approval stage before the new accounting period begins because until and unless the budget numbers are not approved any function or department cannot incur any cost out of that budget right so they need to get a seal or approval from the approving authorities once that approval has come in that budget becomes final and then the departments have all the liberty to spend the money out of that budget then we move on to implementation stage this implementation stage is also called as execution stage so until now your budget was simply on paper or on an excel spreadsheet wherein we had factored in a theoretical cost or a theoretical number execution stage is that stage where the functions or departments actually start spending money it could be hiring new employees it could be investing into technology it could be moving on to new alternative platforms it could be spending on marketing and communication so every step that any function or department is taking it is resulting into dollar cost so at this stage adjustments needs to be made or functions or department heads would make adjustments let's say probably a sales department had factored in thousand dollars as a budget but they realized that there would be multiple questions floating in their mind did we budget enough actually by the end of the year probably we would exceed our budget which means that we did not do our budgeting exercise religiously and obviously there will be a gap which will then raise a lot of concerns in the mind of approver that you did not do the budgeting exercise accurately so all these questions like did we budget enough would we have surplus or deficit starts getting popped up at the implementation or execution stage last stage is the review stage this is also called as auditing and evaluating stage what happens out here is this starts at the end of the accounting period around the year all the departments would have done spendings now an internal auditor or an external auditor would do a brief assessment they would understand what are the various expenditures that all the functions have incurred do they align with the firms compliance and the budgeting compliance policies they will also prepare a final report and an audit report which will evaluate that did we do the budgeting exercise correctly or not because if you have a surplus that means you have saved a good amount of money from the budget which was allocated that means you have done a job well you have done effective utilization of resources but if there is a deficit that means you have over spent and this will then go as a recommendation in the audit report and that could be then factored in by that specific function or department for the next budgeting cycle so what is the importance of budgeting it provides a benchmark against which senior management can judge managers perform so as I told you if a functional head or department head does a significant job to stay within the budget that means they have done their job well and obviously if they are exceeding the budget that means the exercise was not done accurately so straight way it acts as a benchmark for senior leadership team to identify who are potential leaders for the future it helps you to identify targets estimate resource needs manage resources and make decisions budgeting exercise simply helps you to focus on your spending and savings you can focus on certain specific areas where you want to invest significantly or focus your organization's attention because that is the need of the art that is the demand of the market and you think organization would significantly benefit out of it so the senior leaders of the organization would want majority of the budget to be probably consumed by technology because they know technology would come up with lot of new innovative concepts which will help or give a upper hand to the organization in comparison to the competitors budgeting improves communication across the company as well as departments are involved in the process now budgeting provides a framework for all the organizations to work together work in unison so budgeting helps all the departments to work towards the financial goals of the organization involvement in setting companies targets can increase your commitment and job satisfaction obviously when you know your goals and objectives are completely aligned with the goals and objectives of the organization and if you do a job good you will be rewarded with a good performance at the end of the year so it acts as a motivation it helps to evaluate performance of the managers yes if you have done a job well the numbers that you have saved the efficiency that you have brought in through your function would reflect overall and that needs to be then rewarded by the senior leaders of the organization and what i'm going to do is i'm going to play a video it's a visual representation of whatever we have discussed so far wall street is worried about one thing and one thing only and that's the future no matter how amazing your organization has performed in the past they want to know that you're going to knock their socks off three months from now this has a profound impact on organizations as it requires them to plan in detail about how much business they will generate and what costs they will incur a majority of this burden falls on the shoulders of the cfo but cfos don't generally make these predictions alone to get this information cfos will assign line of business managers to provide these forecasts for their business lines then the cfo team will roll up the results to provide a company wide perspective that sounds pretty simple right well it's not in fact in most cases it's an absolute mess the process usually starts with the office of the cfo creating a template in excel this template then gets sent out to all the line of business managers asking them to input their forecasts for next quarter or next year after a line of business manager fills out the excel spreadsheet they'll email it back to the office of the cfo so they can be consolidated to provide a corporate forecast if the cfos team were dealing with only one or two line of business managers this process would be pretty easy but in most organizations they're dealing with dozens of people that are creating and evaluating forecasts so the minute that the finance team thinks that their forecasts are complete they will get yet another revision or an update that must get incorporated into the final tally on top of that finance has to track the most up-to-date version of the spreadsheets out of hundreds of revised copies sitting in their email boxes after this painful process is wrapped up and the forecasts are released the circus starts all over again in preparation for the next forecast so as you can see budgeting and planning is an excel nightmare and this is where budgeting and planning tools step into the picture the challenge of budgeting and planning from a business intelligence perspective is that it requires two kinds of activities read and write in order for line of business managers to predict the future they will need to see their past performance this will help them answer questions like whether trending is steadily increasing and if there are certain months which have spikes or valleys this also allows managers to see how their expenditures are panning out all these activities are read activities which is functionality that every business intelligence tool provides however when it comes to writing back our estimates we quickly hit a wall and a number of business intelligence platforms that provide this functionality drops dramatically which is why so many organizations refer to manually passing around excel files and hand tallying their estimates budgeting and planning tools solve this challenge by deploying their data into olap cubes for more about olap i recommend you see our video called what is olap in olap we get the ability to explicit all right so the whole objective behind showing that video is how organizations do planning and budgeting and more importantly who has the cfo to ensure that the organization is moving in the right direction so that they can achieve their long-term and short-term strategic goals i will quickly show you a comparison of you heard some key terms planning budgeting and forecasting so i am going to use a whiteboard to tell you what exactly is the difference between the three okay so there is mr cfo his responsibility is to ensure or navigate that organization is moving in right direction to achieve strategic goals which means he is responsible for short-term financial planning and long-term financial short term the time horizon is less than a year now we need to ensure that the organization has sufficient liquidity that they will be able to meet their commitments short-term commitment rather and they will not face liquidity crunch one thing very important to understand and organizations don't go bankrupt if they are having two or three bad quarters an organization goes bankrupt if they are not able to meet their short-term or long-term commitments because creditors will file legal suit against these organizations and organizations will then be they have to defend themselves in the code of the law where law will force the organization to sell off their assets and pay back to the creditors right so a cfo has to ensure that at any given point in time an organization is well placed so that they can meet their short-term commitments they don't face a liquidity crunch and they can continue their operations on an ongoing basis now if i talk about long-term financial planning a typical time horizon is 5 years to 10 years now every day the global economic climate keeps on changing is the organization well prepared enough to adapt to these significant changes every day the regulators are demanding for additional control in the way organizations are doing business so obviously organizations need to ensure that they have right amount of talent right amount of innovation and technology in the organization which will help them to adapt to the new environment and at the same time they will be able to sustain and grow in this environment so long-term financial planning helps the cfo to make sure that the organization is well placed comfortably now cfo cannot do this job alone so there is a group which assists the cfo in plain simple language you can call them as finance department but a more technical terminology used is fpna which simply means forecasting planning an analysis group so what does this group do the job of fpna group is to help cfo analyze the future of the organization this is based on past trends based on which forecasting is done which means using accumulated historical data you are actually predicting if the same instances repeat if the same kind of environment comes back how it will impact the revenue and expenditure numbers 5 years down the line or 10 years down the line so that is forecasting then we talk of budgeting budgeting simply means that you have a defined plan in mind for next 10 15 years now this is scattered across 10 15 years so on a month on month basis what kind of spending are you doing to make sure that you are within the budget so that exercise is called as budgeting the focus is primarily is on expenditures so typically any organization would prefer to stay flat on their budgets year on year right but if there is an incremental increase there needs to be valid justification and if there is a decrease the cfo would only be happy that the firm is able to save some dollars right and then we talk about planning so this group provides management reports trends to cfo so that they can plan are they heading in the right direction or does do they need to intervene to take necessary steps so that's the role of financial planning and analysis team they help the cfo to ensure that the firm is able to meet both the short term as well as long term financial goals now I am open to take some questions okay I have a question let me read that out don't you think that there should be transparency in what are the government does with the taxes we pay them like them telling us what happened to every penny we gave them see largely in the union budget the government definitely puts across where the where the government has spent majority of the money that has been collected as part of tax which has been collected by corporates and individuals beyond that I am really sorry I won't be able to comment thank you have replied please explain the fundamentals of mutual fund investment okay I will answer that is there any specific question related to corporate financial planning and budgeting can we go across the centers is there a question 1 0 0 1 Maulana Azad okay if there are no specific questions related to corporate financial planning and budgeting if any one of you have any specific questions related to personal financial planning and budgeting I am open for discussion okay someone asked could you please explain the fundamentals of mutual fund investment fundamentals are fairly simple you need to research which mutual fund schemes you want to invest into you need to understand your risk profile you need to ascertain how much would you be able to contribute towards this mutual fund investment what is the time horizon you are looking for to invest into a mutual fund scheme when do you want your money back are you happy with the past returns that the fund has generated there are various tools available online which can help you to track the performance of the mutual funds so these are some of the basic fundamentals that you need to keep in mind before choosing any mutual fund scheme what is projecting how is it different from forecasting and planning projecting is similar to forecasting you are projecting certain specific set of numbers your projections are based on certain assumptions now these assumptions are not hundred percent accurate but they are based on previous historical data and that is how you are projecting or forecasting numbers so projecting or forecasting is one and the same valchin institute of technology this institute is on a roll maximum questions from this institute I am really happy hello sir two questions are there is there any rule or any law which prevents the company to make unusual profits and one more question is that what is the nature of internal and external audit of a company okay I will answer first question first obviously all the organizations are corporates are answerable to the local regulators in the country in which they are operating the job of a regulator is to ensure that the organization is purely working in the vested interest of the investors so any company which is making unusual profits if they are not able to justify they will be heavily penalized whenever the regulators are going for audits right question number two there are the internal audit team acts as a line of defense the job of internal audit team is to make sure that every function within the organization is doing their job as per the regulatory law as per the rules which have which they need to abide so what they can do is they can help functions or departments ascertain that okay you have done steps one two three four correctly but there is a huge gap between step five and six and this could result into reputational laws or financial laws for the organization so they can prepare the departments well in advance before an external auditor highlights discrepancies in the performance of a particular function external auditor obviously the organization external auditors are independent bodies their job or organizations or corporates appoint these external auditors to get a purse to get an external perspective they have got a perspective from an internal auditor but now they want an external person's perspective so they get a holistic view that okay our guy who is an internal auditor he is done his job he has identified three or four red flags now the same is the same task is given to an external auditor does he identifies the same four points which have been identified by an internal auditor or he may point out additional two pointers that way that will help an organization to be much well placed before any regulator penalizes them so you can think an organization is willing to invest or bear the auditing charges so that they can make sure that their reputation is not at stake or they don't incur significant financial loss when a regulator identifies that there are potential loopholes in the functioning of the organization what should i do if i face loss the upper investment is mutual fund can you keep your mic closer what should i do if i face loss in mutual fund okay if you face loss in mutual fund as i told you all the investments in the market have certain risks associated with it if you face loss in mutual fund if you have the ability that you don't need your funds immediately you should give some time for those funds to come back see mutual fund investments are like tennis ball right once you put the ball down it will bounce back much stronger right so with the time the economy will change the market conditions would change and you would see that your mutual fund will start performing again so if you don't need the funds immediately there is no medical emergency you should allow those funds to stay there and you will see gradually after few years you are able to generate again good returns then it decrease again so when people invested the rate was when the rate was increasing and then rate was decreased till the rate have not come to that extent where it is it has increased what should those people do okay are there any chances okay before you choose mutual fund as a tool for investment be prepared be prepared to not touch your money for 3 to 5 years if you really want to make wealth out of your investment if you want to make 5 to 6 percent then why go for mutual fund you can go for some alternative investments but if you are going for a mutual fund investment you should at least have a time horizon of 3 to 5 years that's where the power of compounding will come into picture that's where you will see there's lot of increment in the overall portfolio so if you have that holding period capacity then only invest in mutual fund sir please explain corporate financial planning with some example like automobile or pharma or software industry so that the students can understand it okay I can take an example of let's say I can take an example of an id company or a technology company a technology company if they want to let's say increase their market share there could be multiple ways by which they can do it right let's take an example of a mobile company let's say a mobile company is enjoying 20 percent market share and they think that within next 5 years they should be able to increase their market share to 50 percent how do they do it a they can launch new products b they can work on increasing the overall brand value the brand recall value of the organization see they can play around with the pricing of their existing products so that they can be more competitive and they will be able to actually acquire the market share of other competitors so that's the analyzing phase right I have multiple options and if I'm going let's say I want to launch a new product obviously I will need to look for funding so I will need to look for financing options as well do I use the profits or reserves that I have with me on my balance sheet or do I look for short-term borrowing from other bank or other credit institutions right so that's the analyzing phase where I will decide what option of financing and investment do I need to choose a firm can also do one thing that they are doing really well they are very they have significant amount of cash on which they are sitting they can simply acquire their competitor by taking maximum portion of the shares that that particular competitor has in the market so by directly acquiring their competitor they have anyways captured a larger market share right now these are all viable options so the senior leaders of the organization and the CFO has to project or determine out of these options which will give me the maximum benefit which will generate the highest return on investments for my investors you need to understand all good organizations they work with one focus that they need to generate return for their investors it is the shareholders money which has created the organization what they are today so end of the day whatever decision they are taking it needs to generate returns back for their investors right so that's where they will project out of all the options which one seems viable which will generate maximum benefits for the investors then they will decide on to which step they need to take should we acquire their competitor or no we did not acquire a competitor we would rather launch a new product line and probably give more competition and offer more product offering to consumers in the market that would indirectly increase our total brand recall value and that will help us to acquire more market share in the longer and in the market and eventually they will then measure okay we we took a decision that we will not go for acquisition we would introduce a new product line with the introduction of that product line I will predict and forecast okay I was expecting 10 percent increase in my overall sales but how much has the sales actually increased so what I will do is I will compare my actuals versus my forecasted numbers if I see my actuals are pretty much in line with the forecasted numbers that means you have taken a right decision you are heading in the right direction but if you see even in spite of introducing a new product line your sales have not changed at all that means the new decision the financial decision that the senior leaders took is having no positive impact on the overall financial plan so basis that they can then flex around with their plan they can take alternative steps or amend the steps so that in a nutshell is a simple example of corporate financial plan with the help of a technology example did that help? yes sir thank you thank you Lou hello do you need to do you need to yes I can hear you go ahead what is capitalization what is what is capitalistic capitalistic structure and how it helps in financial planning okay capital structure is simply the source of funds how the organization has created source of funds right so I have two sources of funds a I can borrow shareholders money how I do it I will go for an initial public offering I am ready to become a publicly listed company which means I am ready to dilute the ownership of my company with large number of investors who believe in my business model and they want to become shareholders with me or alternatively I make a decision that I do not want to dilute the ownership of my company but I still need funds so in that case what I can do is I can issue debt securities like bonds which is a promissory note which says that whoever is the holder of the bond since they have given me loan I am going to pay them interest which is nothing but coupon on that bond which the investors earn over the period of for which this relationship is so capital structure simply tells out of the total funds that the organization has managed to raise how much of it has come from equity and how much of it has come from debt okay any more questions how it helps in financial planning it definitely helps in financial planning because organization whenever they are raising capital they need to understand or they will always take into consideration what is the cost associated around raising that capital if I see that the cost associated around raising capital through equity is less in comparison to cost associated around raising capital through debt I would probably prefer to go the IPO route and dilute my ownership so that plays a very critical role because in the initial years you want to limit your overall spending you want to play with limited investment so that you get a lot of opportunity or a free hand to invest and increase your production capacity and generate benefits or profits for the investors thank you sir hello good evening sir good evening sir for a startup or a starting of a business or a small business what kind of financial knowledge should we have a is your plan foolproof or b do you have alternatives if plan a doesn't work c is your plan good enough that there would be certain investors who would be interested in buying that particular business fourth how different you are then what is already available in the market if you are not different people won't be interested to invest in your product yes sir thank you right so most importantly to put it in a nutshell what is the unique selling proposition what is the usp of your business idea thank you sir thank you so much okay I have a question from Pankaj Namdev in the budget planning of a corporate house if the planned amount is exhausted then is there a provision to increase the budget during the financial year the answer is yes there can be adjustments that can be made in the budget but obviously that will come out as an auditing point and then the functional head or department will need to defend that particular query that why did they exceed the overall budgeted numbers if there is a valid justification then that feeds in as an input that for the next financial year or the next budgeting cycle they feed in the right budgeted numbers so that cfo's know that this particular function or department they would require x dollar amount for the next financial yes so adjustments definitely can be made okay if there's no specific question thank you all for your time I hope you benefited from the session thank you so much if you have any additional questions you can always put it on the blog and some of us will answer it back thank you so much