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Financial Planning

The document defines financial planning as the process of estimating capital requirements and determining competition. It involves framing financial policies around procuring, investing, and managing enterprise funds. The objectives of financial planning are to determine capital needs, structure capital, and frame financial policies regarding cash control, lending, and borrowing. Financial planning is important because it ensures adequate funds, balance between cash inflows and outflows, supplier investment, growth and expansion, reduced uncertainty around market trends, and overall stability and profitability.

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Ashu Angel
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56 views

Financial Planning

The document defines financial planning as the process of estimating capital requirements and determining competition. It involves framing financial policies around procuring, investing, and managing enterprise funds. The objectives of financial planning are to determine capital needs, structure capital, and frame financial policies regarding cash control, lending, and borrowing. Financial planning is important because it ensures adequate funds, balance between cash inflows and outflows, supplier investment, growth and expansion, reduced uncertainty around market trends, and overall stability and profitability.

Uploaded by

Ashu Angel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Definition of Financial Planning

Financial Planning is the process of estimating the capital required and determining its
competition. It is the process of framing financial policies in relation to procurement, investment
and administration of funds of an enterprise.
Objectives of Financial Planning

Financial Planning has got many objectives to look forward to:


a. Determining capital requirements- This will depend upon factors like cost of current and
fixed assets, promotional expenses and long- range planning. Capital requirements have
to be looked with both aspects: short- term and long- term requirements.
b. Determining capital structure- The capital structure is the composition of capital, i.e., the
relative kind and proportion of capital required in the business. This includes decisions of
debt- equity ratio- both short-term and long- term.
c. Framing financial policies with regards to cash control, lending, borrowings, etc.
d. A finance manager ensures that the scarce financial resources are maximally utilized in
the best possible manner at least cost in order to get maximum returns on investment.
Importance of Financial Planning

Financial Planning is process of framing objectives, policies, procedures, programmes and


budgets regarding the financial activities of a concern. This ensures effective and adequate
financial and investment policies. The importance can be outlined as1. Adequate funds have to be ensured.
2. Financial Planning helps in ensuring a reasonable balance between outflow and inflow of
funds so that stability is maintained.
3. Financial Planning ensures that the suppliers of funds are easily investing in companies
which exercise financial planning.
4. Financial Planning helps in making growth and expansion programmes which helps in
long-run survival of the company.
5. Financial Planning reduces uncertainties with regards to changing market trends which
can be faced easily through enough funds.
6. Financial Planning helps in reducing the uncertainties which can be a hindrance to
growth of the company. This helps in ensuring stability an d profitability in concern.

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