“Sound Financial Planning is essential for the success of any business enterprise.” Explain this statement by giving any six reasons.

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What do you mean by ‘Financial Planning’? Discuss the importance of financial planning in financial management.

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“Financial planning does not serve any useful purpose”. Comment.

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To avoid the problem of shortage and surplus of funds what is required in financial management? Name the concept and explain its any three points of importance.

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To tackle the uncertainty in respect of availability and timings of funds what is required? Name the concept involved and explain its three points of importance.

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What is required to tackle the uncertainty in respect of availability and timings of funds? Name the concept involved and explain any three points of its importance.

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Name the process which helps in determining the objectives, policies, procedures, programmes and budgets to deal with the financial activities of an enterprise. Explain its three points of importance.

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State any two reasons why financial planning is important.

Financial planning pertains functions of finance and includes the determination of firm’s financial objectives, financial policies and financial procedures.
Main points of the importance of financial planning are as under:
(i) Helps to Face the Eventualities: It tries to forecast various business situations. On this basis, alternative financial plans are prepared. By doing so, it helps to face the eventual situations in a better way.

(ii) Helps in Avoiding Business Shocks and Surprises: Proper provision regarding shortage or surplus of funds is made by anticipating future receipts and payments. Hence, it helps in avoiding business shocks and surprises.

(iii) Helps in Coordination: It helps in coordinating various business activities, such as, sales, purchase, production, finance, etc.

(iv) Helps in Avoiding Wastage of Finance: In the absence of financial planning, wastage of financial resources may take place. This arises due to the complex nature of business operations, such as, excessively over or under estimation of finance for a particular business operation. Such type of wastages can be avoided through financial planning.

(v) Helps to Link the Present with the Future: It makes efforts to link the present with the future. By doing so, it helps to minimise the risk of future uncertainties.

(vi) Helps in creating Link between Investment and Financing Decisions: It helps in deciding that where to invest and from where the required funds will be made available. Under it the mix of share capital and debt capital is made in such a manner that cost of capital is reduced to minimum.