Strategic Financial Plan

Strategic Financial Plan

FIN/486

Strategic Financial Plan

To: Unit Managers

From: Team C

The financial portion of the strategic plan for Huffman Trucking is a very important part of the company's success and can have a large impact on the company. The three statements included in the plan are the income statements, balance sheets, and cash flow statements. The statements cover a three- year period from 2007 to 2009. Throughout this memo team C will explain the plan's major assumptions and identify areas of risk.

The cash flow statements show where the cash is coming from and how it is being spent by the company. Huffman Trucking can use this information to predict future cash flows and to budget the company correctly.

Capital budgeting techniques are the tools used to assess project acceptability and ranking (Gitman, 2009). Huffman Trucking risk mitigation team will apply the three techniques of capital budgeting to comply with the company mission statement. In order for the company to be competitive new projects will have to implement capital budgeting techniques using net present value (NPV), payback period, and internal rate of return (IRR). The NPV will measures the amount of value created by a given project; only positive NPV projects are acceptable (Gitman, 2009). If Huffman Trucking NPV resource is more than zero, the company will net a return better than previous budget of its investment.

According to Gitman, 2009 if the Huffman Trucking team applies the payback period it will be the amount of time required for the company to earn its preliminary investment, as calculated from cash inflow. The company will have to take into consideration that this technique does not take into account the time value of money. The risk mitigation team will have to apply the payback period to determine if to accept or reject a new project for purchasing a new fleet of trucks. This determination is made based on payback period will be acceptable for the...