Question

'Financial Planning is a financial blueprint of an organisation's future operations'. Explain the twin objectives of Financial Planning in the light of this statement.

Answer 1

Financial planning strives to achieve the following two objectives

(i) To ensure availability of funds whenever these are required This includes a proper estimation of the funds required for different purpose such as for the purchase of long-term assets or to meet day-to-day expenses of business, etc. Apart from this, there is a need to estimate the time at which these funds are to be made available. Financial planning also tries to specify possible sources of these funds.

(ii) To ensure unneccessary finance is not raised Excess funding is almost as bad as inadequate funding. Even if there is some surplus money, good financial planning would put it to the best possible use so that the financial resources are not left idle and don’t unnecessarily add to the cost.