Answer:

First of all let us understand the meaning of financial planning  model. This model is created to help the management to explore the results of various business strategies. It may be simple or it may be complex. In the end it will lead to long term or short term goal. It allows management to  to forecast financial statements. Generally historical data are used  to create the model
We can highlight the following element of Financial Planning Model
1

sales forecast

It drives a financial planning model. Let us take Example. Suppose ABC company have had $200 million dollars in total sales  during the year 2015 and it had growth rate remain constant 10% over the last few years now management  anticipates sales growth to increase to 15% in 2016. With the increase in sales growth expected to be 10%, ABC limited can  forecast 2016 total sales to equal $250 million dollars.

2

pro forma financial statement

Now management of ABC limited has to create pro forma financial statement. This is just another words to say ” What we think for the future”. Historical data are used to create

proforma financial statement. Now ABC limited used sale forecast  of $250 million  to create an income statement for 2016 from sales expected expanses are deducted to arrive net income

3

asset requirements

Now ABC limited has to determine sufficient cash on hand balance and money from upcoming sales  to pay the future period expanses of that particular period So that they can identify weather they have to borrow the money from outside or they have sufficient cash balance

4

financial requirements

The fourth element is to decide the financial requirements. I mean to say detail debt and dividend information. ABC limited should identify the details of debt portion and at the same time they have to identify the dividend requirement. How much interest they have to pay and how much dividend thy have to pay

5

Economic assumptions
This is the last element of Financial Planning Models. In this step management has to describe the economy, market sector and other external factors