What Is Financial Planning For A Business

Higher level of production and increase in sales will require higher fixed as well as working capital.

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Financial planning helps in deciding debt/equity ratio and by deciding where to invest this fund. It helps in coordinating various business functions such as production, sales function etc.

Financial planning relates present financial requirement with future requirement by anticipating the sales and growth plans of the company.

All business plans depend upon the soundness of financial planning.

By anticipating the financial requirements financial planning helps to avoid shock or surprises which otherwise firms have to face in uncertain situations.

Budgets include detailed plan of action for a period of one year or less.

Sound financial planning is essential for success of any business enterprise.In other words, no one is telling our reporters or editors what to write or to include any particular positive or negative information about these products or services in the article.The article's content is entirely at the discretion of the reporter and editor.The success or failure of production and distribution function of business depends upon the financial decisions as right decision ensures smooth flow of finance and smooth operation of production and distribution.Financial planning acts as basis for checking the financial activities by comparing the actual revenue with estimated revenue and actual cost with estimated cost. So financial planning is an integral part of the corporate planning of business.(a) The financial planning begins with determination of total capital requirement.For this the finance managers do the sales forecast and if the future prospects appear to be bright and expect increase in sale, then firm needs to increase its production capacity which means more requirement of long term funds.Its need is felt because of the following reasons: The financial planning estimates the precise requirement of funds which means to avoid wastage and over-capitalization situation.Funds can be arranged from various sources and are used for long term, medium term and short term.Some of the important objectives and importance of financial planning for an organization are as follows: Financial planning means deciding in advance how much to spend, on what to spend according to the funds at your disposal.In the words of Gerestenbug financial planning includes: (i) Determination of amount of finance needed by an enterprise to carry out its operations smoothly.


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