ABCD CLASSES
- Books Name
- BUSINESS STUDIES-XII
- Publication
- ABCD CLASSES
- Course
- CBSE Class 12
- Subject
- Business Studies
FINANCIAL PLANNING
Meaning - It involves the preparation of a financial blueprint for an organization. It is the process of estimating the fund requirement of a business and determining the possible sources from which it can be raised.
Objectives of Financial Planning:
- To ensure the availability of funds whenever they are required:
- Includes estimation of the funds required for different purposes (long term assets/wk cap requirement)
- Estimate the time at which these funds need to be made available.
- Specify sources of these funds.
- To see that the firm does not raise resources unnecessarily:
- Shortage of funds => firm cannot meet its payment obligations. o
- Surplus funds => do not earn returns but add to costs.
Importance of Financial Planning:
- Co-coordinating different functions: Financial Planning helps to coordinate the activities of the financial departments and other departments. Helps in co-coordinating various business functions e.g., sales and production functions, by providing clear policies and procedures.
- Avoiding business shocks and surprises: Financial Planning aims at studying various factors that have an impact on the business and helps in predicting the probability of their occurrence. Thus, Financial Planning helps to avoid shocks and surprises by predicting them in advance and developing plans to meet them.
- Makes the firm better prepared for the future: Financial Planning tries to forecast what may happen in the future and prepares alternative plans to meet different eventualities. Financial Planning would help to identify the sources from which funds can be raised to finance such a programm.
- Evaluation of performance easier: Financial Plans set standards against which actual performance is compared. The deviations that are identified can be corrected and necessary steps can be taken to prevent their re-occurrence.
- Links the present with the future: Financial Planning helps to estimate future requirements and prepares plans in the present to balance requirements of funds with the availability of funds.
