Financial Planning: Functions, Objectives and Its Importance

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Financial Planning: Functions, Objectives And Its Importance (Management)

Financial Planning

Financial Planning

Financial Planning

Financial Planning

Financial Planning

  • Financial Planning is the process of estimating the capital required by the concern and determining it’s competition.

  • It is the process of framing financial policies related to procurement, investment and administration of funds of an enterprise.

Financial Planning Has Got Many Objectives to Look Forward To

Financial Planning

Financial Planning

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.

Determining Capital Structure

  • This includes decisions of debt- equity ratio- both short-term and long- term.

  • The capital structure is the composition of capital

Framing Financial Policies

  • Framing financial policies with regards to cash control, lending, borrowings, etc.

  • A finance manager ensures that the scarce financial resources are maximally utilized in the best manner 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.

Importance of Financial Planning

Importance of Financial Planning

Adequate Funds Have to be Ensured For

  • Helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.

  • Ensures that the suppliers of funds are easily investing in companies which exercise financial planning.

  • Helps in making growth and expansion programmes which helps in long-run survival of the company.

  • Financial Planning reduces uncertainties with regards to changing market trends

  • Financial Planning helps in reducing the uncertainties which can be a hindrance to growth of the company. This helps in ensuring stability and profitability in concern.

MCQs

1. What happens if uncertainties are reduced in the business?

a. Helps in ensuring stability and profitability in concern

b. Helps in ensuring a reasonable balance between outflow and inflow of funds

c. Helps in making growth and expansion

d. None of the above

Answer: A

2. The capital structure is the composition of _______________

a. Debt

b. Equity

c. Profit

d. Both a and b

Answer: D

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