MSG Team's other articles

12851 Compounding Intervals and Interest Rate

Theoretically there are two types of interest rates, simple and compounding. However, in finance the word interest usually refers to compound interest. Simple interest almost never factors in financial calculations. In all calculations related to present values and future values, compound interest is used. However, as a student of corporate finance, it is essential to […]

8797 Strategic Financial Management – Meaning and Its Functions

The study of financial management is imperative for anyone trying to make a career in the industry. However, traditional financial management helps to make short-term decisions. For example, the main purpose of financial management is to guide corporations about making three decisions viz. the investment decision, the financing decision as well as the dividend decision. […]

11447 The Sudden Downfall of IL&FS

The Infrastructure Leasing and Financial Services (IL&FS) corporation were one of the bellwethers of India’s infrastructure sector. Ever since the government started pushing for better infrastructure, IL&FS was one of the first companies to come into existence. This company is responsible for building thousands of kilometers of roads and several ports. This financial giant has […]

9378 Forex Trading vs. Regular Trading

Trading foreign exchange is markedly different from trading other financial assets in the market. There are certain unique features of foreign exchange which make it so different. In this article we have listed down these features and explain how they influence an individual’s ability to trade the market. Currencies Come in Pairs The biggest difference […]

11533 The Economics of Lawsuits

The United States of America takes pride in its judicial system. According to most American economists, the judicial system of America is the backbone of the American economy. Since property laws are rigidly enforced, and investors are sure that their economic interests will be protected they tend to invest their money in America. The number […]

Search with tags

  • No tags available.

Definition of Financial Planning

Financial Planning is the process of estimating the capital required and determining it’s competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.

Objectives of Financial Planning

Financial Planning has got many objectives to look forward to:

  1. 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.

  2. Determining capital structure- The capital structure is the composition of capital, i.e., the relative kind and proportion of capital required in the business. This includes decisions of debt- equity ratio- both short-term and long- term.

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

  4. A finance manager ensures that the scarce financial resources are maximally utilized in the best possible manner at least cost in order 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. The importance can be outlined as-

  1. Adequate funds have to be ensured.

  2. Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.

  3. Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.

  4. Financial Planning helps in making growth and expansion programmes which helps in long-run survival of the company.

  5. Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds.

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

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

Financial Management: Meaning, Scope, Objectives & Functions

MSG Team

Capital Structure – Meaning and Factors Determining It

MSG Team

Capitalization in Finance

MSG Team