Financial Planning Explained
“Suitable financial planning is indispensable for the fulfillment of business objectives. The need for a practical financial plan is as vital for a new concern as it is for an existing concern. ”
Any kind of business cannot do without catering to its finances. In fact, finance is the soul of any business. If proper finance is not available to a business, little can be expected of it as far as appropriate profit is concerned.Suitable financial planning is indispensable for the fulfillment of business objectives. The need for a practical financial plan is as vital for a new concern as it is for an existing concern. A financial plan that relies solely on principles and theories is doomed to fail at any moment of time.
The financial, social and political conditions of a particular country and region ought to be taken into account for a successful finance plan. The local factors are also not less important and must be given due importance in any kind of financial decision.
Financial plan is helpful in estimating financial requirements, selecting the sources of money and excellent use of funds. The policies regarding manufacture and marketing are also associated with the accessibility of finance. All business activities spin around finance.
Financial planning has two aspects. First is estimating financial need. It depends upon the fixed and working capital requirements. The need for fixed possessions depends upon the nature of a business. Manufacturing concerns invest more in fixed assets as compared to trading concerns.
The need for working capital depends upon the requirement of raw materials and day-to-day operating costs. The future expansion plans should also be well thought-out before deciding about a financial plan. After considering financial requirements, sources for raising funds ought to be taken up.
The sources of funds include owned funds and borrowed founds. The form of organization whether it’s a sole trader, partnership or joint stock company, also controls the choice about source of funds.
A sole trade business and partnership concern have to depend upon the funds of owners only while a company can raise finances from external sources also.
Besides share capital, a company can raise capital through debentures, public deposits and financial institutions. The expected rate of profitability and sales forecasts should also be taken into account while shaping the capital constitution.
Author - DeeKay
This article was created by DailyOjo staff. Report Spam/Abuse