Financial management helps to determine the financial requirement of the business concern and leads to financial planning. Financing Planning plays a major role in the areas of financial management such as capitalization, financial structure, leverage and forecasting.
It includes the following important parts –
(a) Estimating the amount of capital to be raised
(b) Determining the form and amount of securities
Financial planning indicates a firm’s growth, performance, investments and requirements of funds during a given period of time. It involves preparation of projected profit and loss account, balance sheet and funds flow statements. The important tasks are –
(a) Allocation of funds
(b) Generation of funds.
It helps a firm to regulate its funds . It can be done with a short, medium or long time perspective.
Financial Planning Process →
Financial planning requires a series of investment and financial decisions to be taken by the financial manager. It is a continuous and dynamic process.
The process of financial planning involves the following steps →
Evaluation of the current financial condition of the firm.
Analyzing the future growth prospects and options
Appraising the investment options to achieve the stated growth objective
Projecting the future growth and profitability
Estimating fund requirements and considering alternative financing options
Measuring actual performance with the planned performance