Financial Planning

 

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.

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Analyzing the future growth prospects and options

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Appraising the investment options to achieve the stated growth objective

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Projecting the future growth and profitability

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Estimating fund requirements and considering alternative financing options

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Measuring actual performance with the planned performance