Financial planning
• Financial planning means deciding in advance the amount of capital needed, the
sources from which such capital has to be procured, and the time at which funds
have to be obtained.
• The complete process of preparing financial outline is called financial planning.
• Thus, financial planning is concerned with future decisions relating to finance.
Importance of financial planning
• It helps the firm in achieving its objectives through optimum use resources.
• It helps in coordinating and controlling the activities of the firm.
• It provides basis for measuring performance.
• It is helps in determining the optimum capital structure.
• It helps the firm in estimating its present as well as future financial requirements.
Financial plan
• Financial plan is a written form of various financial policies and estimates.
• It is a statement that shows firm’s financial requirements and composition of
various sources of finance.
Sound financial plan
• A plan which bring success or help to achieve objectives of an organisation is known
as sound financial plan.
Characteristics of sound financial plan (features)
1. Simplicity:- a financial plan must be simple. It can be easily understood and
implemented.
2. Liquidity:- a financial plan must ensure liquidity. This requires that sufficient cash
must be maintained to meet the expense as and when they arise.
3. Flexibility:- A financial plan should be such that it can be changed according to the
changing needs of the business.
4. Foresight:- a financial plan must take Into consideration not only the present
requirements but also future requirements of funds.
5. Economy:- the financial plans should ensure that the cost of raising the fund is
minimum and the return is maximum.
6. Long term view:- the financial plan should be formulated, keeping in view the long
term requirements of the firm.
• Financial planning means deciding in advance the amount of capital needed, the
sources from which such capital has to be procured, and the time at which funds
have to be obtained.
• The complete process of preparing financial outline is called financial planning.
• Thus, financial planning is concerned with future decisions relating to finance.
Importance of financial planning
• It helps the firm in achieving its objectives through optimum use resources.
• It helps in coordinating and controlling the activities of the firm.
• It provides basis for measuring performance.
• It is helps in determining the optimum capital structure.
• It helps the firm in estimating its present as well as future financial requirements.
Financial plan
• Financial plan is a written form of various financial policies and estimates.
• It is a statement that shows firm’s financial requirements and composition of
various sources of finance.
Sound financial plan
• A plan which bring success or help to achieve objectives of an organisation is known
as sound financial plan.
Characteristics of sound financial plan (features)
1. Simplicity:- a financial plan must be simple. It can be easily understood and
implemented.
2. Liquidity:- a financial plan must ensure liquidity. This requires that sufficient cash
must be maintained to meet the expense as and when they arise.
3. Flexibility:- A financial plan should be such that it can be changed according to the
changing needs of the business.
4. Foresight:- a financial plan must take Into consideration not only the present
requirements but also future requirements of funds.
5. Economy:- the financial plans should ensure that the cost of raising the fund is
minimum and the return is maximum.
6. Long term view:- the financial plan should be formulated, keeping in view the long
term requirements of the firm.
