Question

Explain the meaning of Financial Planning. Why is it important? Give any two reasons.

Answer 1

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.

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-

• Adequate funds have to be ensured.
  
• Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
  
• Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.