Financial planning is essentially the preparation of blueprint of organisations’ future operations. The objective of financial planning is to ensure that enough funds are available at the right time.
(i) Explain the objectives of financial planning
(ii) State any two importance of financial planning. (Hi) Identify which values have to be taken care of, in
financial planning.
(i) Objectives of financial planning :
(i) To ensure availability of funds whenever these are required in order to honour its commitments and carry out operations as planned.
(ii) To see that the firm does not raise resources unnecessarily, as idle funds raise the cost of finance as well as give way for wasteful expenditure and misuse of funds.
(ii) Importance of financial planning:
(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.
(iii) Values, which have to be taken care of are
(a) Responsibility
(b) Decisiveness
© Coordination