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Financial Management — Business Studies STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceBusiness StudiesFinancial Management6 Marks
Question
What is meant by 'Financial Planning'? Explain any five points which highlights its importance.
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Answer

Financial planning is an important part of overall planning of any business enterprise. It is the process of determining the objectives, policies, procedures, programmers and budgets to deal with the corporate financial activities of an enterprise. the importance of financial planning can be explained as follows:
  1. Financial' planning involves accurate forecasts of the present and future requirements of funds. Intelligent estimates of financial requirements enables the enterprise to overcome the problem of excess or shortage of funds. Adequate funds are available for `smooth working of business.
  2. It helps in coordinating various business functions e.g. sale and production function by providing clear policies and procedure.
  3. It facilitates effective financial control throughout the organization.
  4. It tries to link the present with the future.
  5. It provides a link between investment and financing decisions on a continuous basis.

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