1. Chapter = 8 FINANCIAL PLANNING

2. Financial Planning “Financial Planning pertains to the function of finance and includes the determination of the firm’s financial objectives, financial policies and financial procedures.”

3. Objectives of Financial Planning  To make available the adequate funds for business so that they can be used upto the optimum point  To collect the funds at a time when the cost of capital is minimum, considering the investors who are willing to bear risk.  To bring flexibility in planning so that adjustment in the capital structure can be made with the changing circumstances.  To make the financial plan simplified according to the objectives of plan.

4. Types of Planning Planning  Short term financial planning  Medium term financial planning  Long term financial planning

5. Significance of Financial Planning  Optimum utilization of resources  Helpful in optimum capital structure  Efficient operation of Business  Expansion of Business  Adequate Liquidity

6. Procedure of Financial Planning  Laying down Financial objectives  Formulating Financial policies  Developing Financial procedures  Preparation of Financial Plan  Reviewing of Financial planning

7. Characteristics of a sound Financial plan  Simplicity  Intensive use  Flexibility  Liquidity  Economical  Contingencies  Uniformity  Availability

8. Factors Financial Plan  Nature of Business  Risk  Plans for Growth and Expansion  Attitude of Management  Government control  Scope of Business  Facility of Lease

9. Limitations of Financial planning  Based on Forecasts  Rigid Attitude of Management  Lack of Coordination

10. Assessing Funds Requirements

11. Assessment of Fixed Assets Requirements

12. Factors affecting the funds for fixed assets Internal factors External factors

13. Internal factors  Nature of Business  Size of business  Scope of Business  Facility of lease  Sub Contract  Acquisition of old equipments  Acquisition of assets on rent  Availability of fixed assets at concessional rates

14. External factors  International conditions  Population Trends  Secular Trends in the economy  Consumer Preferences  Competitive factors  Technological changes

15. Assessment of funds required for current assets

16. Assessment of funds requirements of intangible assets  Promotion expenses  Organisation expenses  Operating losses  Cost of financing  Goodwill or Patents