What is meant by financial planning? State its objectives.
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Discuss the two objectives of financial planning.
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‘Financial planning is a financial blueprint of an organisation’s future operations.’ Explain the twin objectives of financial planning in the light of this statement.
Financial planning means estimating the requirements of business and determining the sources of funds. Financial planning includes both short-term and long-term planning.
Objectives of financial planning are:
(i) To ensure availability of funds whenever required If adequate funds are not available, the business unit will not be able to honor its commitments and plans.
(ii) To see that the firm does not raise funds unnecessarily-If excess of funds are available with the business unit, it will unnecessarily add to the cost and may encourage wasteful expenditure and misuse of funds.