Principles of Finance: Financial Planning

PRINCIPLES OF FINANCE
PROF:AMEYA PATIL
FINANCIAL PLANNING
FYBBA
MEANING
According to P.V. Kulkarni , ‘ planning pertains to the function of finance and
Includes the determination of the firms financial objectives , formulating
And promulgating and financial policies and developing financial procedure’.
According to the Oxford dictionary of business and management ,

“financial planning is the formulation of short-term and long-term plans in
Financial terms for the purpose of establishing goals for an organisation
To achieve, against which its actual performance can be measured.”
FINANCIAL PLANNING is an ongoing process as finance is required at every

Stage in the life of a business. It is an important consideration for growth,
Expansion, dividend decleration, credit period decisions, investment decisions,etc.
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OBJECTIVES OF FINANCIAL PLANNING
 Determine the financial resources required to meet the
company’s operating programme.
 Forecast the extent to which these requirements will be met
by internal generation of funds and to what extent they will
be met by external sources.
 Develop the best plans and to obtain the requirement of
external funds.
 Formulate programmes to provide the most effective profit-
volume-cost relationships.
 Report the facts to the top management and make
recommendation on future operations of the firm.
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TYPES
BUDGET
OPERATING FINANCIAL CAPITAL

BUDGET BUDGET BUDGET
Operating budget are These budgets are It involves the planning

Can be prepared for a connected with the to acquire worthwhile
Period and no change financial implications projects together with
will be introduced in of the operating the timings of the
the plan during the budgets . It analyses estimated cost and cash
period of its the cash inflows and flows of each project.
implementation. outflows , financial
position and the
operating results.
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FINANCIAL FORECASTING.
Financial forecasting refers to the formal process of predicting future events which
are going to affect the functioning of the firm’. It involves use of forecasting
techniques.
Some of the important forecasting techniques are :
1- Percentage of sales method : This is the simplest forecasting technique. Sales

determine the financial needs of a firm as per technique , the different times of
assets and liabilities , revenues are expressed as a percentage of sales.
2– Simple regression method : This is the simplest forecasting technique. Sales

determine the financial of needs of a firm.
3- Multiple regression method : Under this technique the impact of other items of
other items on the sales are also considered. In other words , sales is considered to
be a function of other items.
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SIGNIFICANCE OF FINANCIAL PLANNING.
A sound financial plan provides the following benefits :
1- It helps to know potential financial problems before they actually occur. The plan
sets the course of action to be taken to deal with crisis situations.
2- It provides a standard for financial performance which helps in comparing the

actual performance with that of the standard set in the plans.
3- It helps in identifying the factors that determine the success and well being of the
business.
4- Financial planning permits the management to focus on important , non routine

and critical matters, thereby saving the time and energy of the management.
5- Financial planning includes the timing of procurement of the funds. This helps in
maintaining solvency of the firm.
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LIMITATION
1.Financial forecasting is an integral part of financial planning. forecasting uses
past data to estimate the future financial requirements.
2.Financial planning is not a science. its accuracy may suffer due the subjectivity
Of the their personal biases. Management may have vested interest which may be
in conflict with the interests of the shareholders
3.There is a plan, doesn’t mean that the management would just allow things to
happen as per the plan
4.Financial forecasting in itself is not enough for the success of a financial plan.
effective implementation of the plan is of utmost importance.
FYBBA
THANK YOU
BIBLIOGRAPHY:TEXT BOOK (POF).

FYBBA

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PRINCIPLES OF FINANCE

According to the Oxford dictionary of business and management ,

FINANCIAL PLANNING is an ongoing process as finance is required at every

OPERATING FINANCIAL CAPITAL

Operating budget are These budgets are It involves the planning

Some of the important forecasting techniques are :

1- Percentage of sales method : This is the simplest forecasting technique. Sales

2– Simple regression method : This is the simplest forecasting technique. Sales

2- It provides a standard for financial performance which helps in comparing the

4- Financial planning permits the management to focus on important , non routine

BIBLIOGRAPHY:TEXT BOOK (POF).

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