Financial planning: It is the process of estimating the financial requirements of an organisation specifying the sources of funds and ensuring that enough funds are available at the right time.
Sound financial planning is essential for the success of an business enterprise because of the following points:
(i) It helps in forecasting what may happen in future under different business situations.
(ii) It helps in avoiding business shocks and surprises and helps the company in preparing for the future.
(iii) It helps in coordinating various business functions.
(iv) It tries to link the present with the future.
(v) It provides a link between investment and financing decisions on a continuous basis.
(vi) It helps in reducing waste, duplication of efforts and gaps in planning.
(vii) It acts as the basis of control, by spelling out the objectives of various business segments.