Question

State any three points of importance of Financial Planning.

Hint:

Financial planning is like a "Financial Blueprint" for the company. Without it, the firm might run out of cash during expansion even if it is profitable.

Answer 1

Step 1: Understanding the Concept:
Financial planning is the process of estimating the fund requirements of a business and specifying the sources of funds to ensure that enough funds are available at the right time.
Step 2: Detailed Explanation:
1. Helps in facing the future: It helps in forecasting what may happen in the future under different business situations. By preparing a blueprint of the future, a company can prepare for various eventualities.
2. Avoids business shocks and surprises: By anticipating future requirements and shortages of funds, it helps the company to avoid sudden financial crises.
3. Coordination: It helps in coordinating various functions like sales, production, and purchase by providing a clear financial roadmap for each department.
Step 3: Final Answer:
The importance of financial planning lies in future preparation, risk mitigation, and functional coordination.