Chapter 7 - Homework

1. What is the connection between SWOT analysis and planning assumptions?

SWOT analysis is a strategic planning technique used to assist people or organizations in
identifying strengths, weaknesses, opportunities, and threats related to competition in business
or project planning. These 4 aspects help business in realizing the present position and its
future status. This can be applied to products, places, industry and individuals. It also helps in
analyzing internal and external factors which can impact business in positively and negatively
too. There is a connection between SWOT analysis and planning assumptions, once with the
data collect through SWOT, it may be possible to make certain assumptions that need to be
made in the marketing planning process.

2. What is planning and why is it so important?

Planning is the act of establishing the current state, defining the objective and goal, carrying
out an analysis of the current situation and its influencers, drawing up an action plan, making
the necessary checks and adjustments and continuing the cycle.
Making the planning is crucial, when carrying out a planning, even if simplified, the chances

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of reaching the goal are much more effective.

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3. Why is budgeting so important?
The budget establishes how the company's business is expected to proceed, providing a very

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close view of the desired future situation. And there is no way to carry out good strategic
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planning without aligning the goals and objectives with the business budget.
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4. What is the purpose of a cash budget?
The cash budget is the forecast for a given future period of the flow of cash inflows and
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outflows from a company. It is an important instrument for the execution of financial planning
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and control at cost and in the medium term of the company.

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5. List the more important rules of effective budgeting?

o Be conservative
o Pay off debts
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o Understanding finance
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o First save then spend

o Utilizing the right resources
o Be realistic
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 Learning Exercises:

EXERCISE 1: EFFICIENCY AND EFFECTIVENESS INDICATORS

Identify efficiency and effectiveness indicators for the following organizational units,
individuals, or organizations:

Sales department
Telephone-answering service
Purchasing department
Politician
Rehabilitation centre
Student
General insurance company
Cleaning department
Security department
School
EFFICIENCY
Annual Turn-over
Total calls answered
Average purchase cost
Promises discharged
Serving capacity
Books or hours studied
Policies undertaken
Rooms cleaned per day
Level of security systems installed
Ranks obtained by the students
EFFECTIVENESS
Market share and net profit
Total queries resolved
Quality of the product purchased
Level of corruption
Rate of cure and discharges
Knowledge or marks obtained
Clients retained and claimed paid
Customer satisfaction and cost of cleaning
Level of a security breach
Overall performance of students

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EXERCISE 2: ZERO-BASED BUDGETING

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Identify the factors that you would consider when using zero-based budgeting to determine
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the level of services for the following organizational units:
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1. Sanitation department: Determining elective intends to discard human waste
2. Training department: Facility rental
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3. Quality control department: Need and cost of preventive measures

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4. Police department: Population development in the territory concerned region

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5. Advertising department: Define the best channel to develop Ads strategy

6. Telephone-answering service: Prioritize for support purpose. For sales, try to use bots
and conduct warm leads to commercial team.
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EXERCISE 3: CASH BUDGET

With the following information about Quantum Plastics Ltd., prepare a cash budget for
January to April 2014 (4 months all in one table side by side).
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The marketing department’s sales forecast follows:

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November (2013) $ 25,000

December 50,000
January (2014) 75,000
February 120,000
March 140,000
April 110,000
The credit manager provides the following information:
20% of sales are on a cash basis.
60% are collected after 30 days.
20% are collected after 60 days.

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 Cost of sales, which is 50% of sales, is incurred in the month in which the sales are made.
These goods are paid for 30 days after the purchases are made.
Monthly selling and administrative expenses are as follows:
Salaries $22,000
Telephone 1,000
Amortization 500
Rent 2,200
Hydro 1,100
Stationery 500
Other expenses are as follows:
Taxes: $3,000 in February and $3,000 in June.
Purchase of equipment in January for $24,000.
The cash balance on January 1, 2014, is $12,000.

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Cash Budget

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Jan Feb Mar Apr

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Sales $75,000 $120,000 $140,000 $110,000

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Cash Receipts
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20% of sales are on a cash basis $15,000 $24,000 $28,000 $22,000
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60% are collected after 30 days $30,000 $45,000 $72,000 $94,000
20% are collected after 60 days $5,000 $10,000 $15,000 $24,000
Total Cash Receipts $50,000 $79,000 $115,000 $130,000
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Cash Expenses
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Cost of sales $25,000 $37,500 $60,000 $70,000

Salaries $22,000 $22,000 $22,000 $22,000
Telephone $1,000 $1,000 $1,000 $1,000
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Amortization $500 $500 $500 $500

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Rent $2,200 $2,200 $2,200 $2,200

Hydro $1,100 $1,100 $1,100 $1,100
Stationery $500 $500 $500 $500
Taxes $3,000
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Purchase of equipment $24,000

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Total Cash Expenses $76,300 $67,800 $87,300 $97,300

Net Cash Flow $26,300 $12,200 $28,700 $33,700

Opening Cash Balance $12,000 $14,300 $2,100 $26,600
Closing Cash Balance $14,300 $2,100 $26,600 $7,100

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