Financial planning

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  1. FINANCIAL PLANNING Presented by:- 1-Nikhil Sharma 2-Archit Mishra MBA FT 2ND sem (2014-2016) IBM CSJM University Kanpur 2. MEANING OF F.P.  Financial planning is an…
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  • 1. FINANCIAL PLANNING Presented by:- 1-Nikhil Sharma 2-Archit Mishra MBA FT 2ND sem (2014-2016) IBM CSJM University Kanpur
  • 2. MEANING OF F.P.  Financial planning is an important function of financial management. This function has to be performed whether the business is big or small. Similarly , a new as well as an existing business must perform this function very carefully because it is concerned with the procurement and effective utilization of funds. A carefully prepared financial plan will not only ensure the economical and sufficient procurement of funds but their proper utilization also.
  • 3. DEFINITION “Financial planning pertains to the function of finance and includes the determination of the firms’ financial objectives, financial policies and financial procedures.” -Walker and baughn
  • 4. Objectives of Financial planning  To raise the funds in a manner that the cost of capital is minimum.  To ensure simplicity in the capital structure.  To ensure sufficient liquidity of funds.  To provide adequate funds to the business. Neither the funds should be short nor in excess of the needs of the business.  To ensure flexibility in capital structure so that changes in the sources of funds may be made according to the changing conditions.
  • 5. Types of Financial planning  Short term planning  Medium term Financial planning  Long term financial planning
  • 6. Steps in financial planning  Determination of financial objectives  Formulation of financial policies  Formulation of procedures  Provision of Flexibility
  • 7. Principal of a sound Financial Planning  A financial plan should be so simple that it may be easily understood by everyone. It should have a simple capital structure capable of being manage easily.  The financial plan should prepared keeping in view the future needs of business.  An ideal financial plan should always aim at the best possible and intensive use of all available resources of finance.  Financial plan must be prepared in such a way that cost of capital is minimum.
  • 8. Conti…..  A financial plan should be sufficiently flexible. It should be possible for a company to change its financial plan with minimum cost and delay it warranted by changed circumstances.  A Financial plan should keep in view the requirement of funds for contingencies. Contingencies means the requirement of funds for unseen events.
  • 9. Factors Affecting Financial Planning  Nature Of Business  Degree of Risk  Standing of the concern  Plans for future growth  Alternative source of management  Atitude of management  Government policies and control
  • 10. Significance of financial planning  Helpful in the efficient operation of business activities.  Helpful in proper capitalization  Helpful in optimum capital structure  Helpful in proper utilization of funds  Helpful in the expansion of the business
  • 11. Limitations of Financial Planning  Financial plan is based on forecast of future conditions.  Once a financial plan is prepared, it becomes quite difficult to change it.  Assets involving huge capital might have been purchased and raw material, labor and other costs might have been incurred.  Sometimes the changes in financial plan also becomes difficult due to rigid attitude of management.
  • 12. THANK YOU
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