Prof. Dr. Zulfiqar Hasan
The projection of sales, income, and assets based on alternative production and marketing strategies, as well as the determination of the resources needed to achieve these projection is called 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.
- Steps in Financial Forecasting
- Forecast sales
- Project the assets needed to support sales
- Project internally generated funds
- Project outside funds needed
- Decide how to raise funds
- See effects of plan on ratios and stock price
Importance of Financial Planning
Ensuring Adequate Funds
Financial planning is important because it ensures the adequate funds available to meet the needs of future, and present.
Preparing Good Budget
It helps to prepare a good budget
Assessing Financial Situation
Financial planning assess business' financial situation
Formulating Financial Strategies
It determines its objectives and formulating financial strategies of how to achieve them.
Performance Evaluation
Financial planning should become a continuous activity where the plan is reviewed regularly and performance measured against specific devised targets
Balance Between Outflow and Inflow of Funds
Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
Easy Investment Environment for Fund Suppliers:
Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.
Making Growth and Expansion Programs:
Financial Planning helps in making growth and expansion programs which helps in long-run survival of the company.
Facing Market Challenges Easily:
Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds.
Reducing The Uncertainties:
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.
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