chapter = 8 financial planning. financial planning “financial planning pertains to the function of...
TRANSCRIPT
Chapter = 8
FINANCIAL PLANNING
Financial Planning
“Financial Planning pertains to the function of finance and includes the determination of the firm’s financial objectives, financial policies and financial procedures.”
Objectives of Financial Planning
To make available the adequate funds for business so that they can be used upto the optimum point
To collect the funds at a time when the cost of capital is minimum, considering the investors who are willing to bear risk.
To bring flexibility in planning so that adjustment in the capital structure can be made with the changing circumstances.
To make the financial plan simplified according to the objectives of plan.
Types of Planning Planning
Short term financial planningMedium term financial planningLong term financial planning
Significance of Financial Planning
Optimum utilization of resourcesHelpful in optimum capital structureEfficient operation of BusinessExpansion of BusinessAdequate Liquidity
Procedure of Financial Planning
Laying down Financial objectivesFormulating Financial policiesDeveloping Financial proceduresPreparation of Financial PlanReviewing of Financial planning
Characteristics of a sound Financial plan
SimplicityIntensive useFlexibilityLiquidityEconomicalContingenciesUniformityAvailability
Factors Financial Plan
Nature of BusinessRiskPlans for Growth and ExpansionAttitude of ManagementGovernment controlScope of BusinessFacility of Lease
Limitations of Financial planning
Based on ForecastsRigid Attitude of ManagementLack of Coordination
Assessing Funds Requirements
Assessment of Fixed Assets Requirements
Factors affecting the funds for fixed assets
Internal factors
External factors
Internal factors
Nature of BusinessSize of businessScope of BusinessFacility of leaseSub ContractAcquisition of old equipmentsAcquisition of assets on rentAvailability of fixed assets at concessional rates
External factors
International conditions Population TrendsSecular Trends in the economyConsumer PreferencesCompetitive factorsTechnological changes
Assessment of funds required for current assets
Assessment of funds requirements of intangible assetsPromotion expensesOrganisation expensesOperating lossesCost of financingGoodwill or Patents