financial management, hospitality management, 5th semester

2. MEANING
• Financial planning is essentially the preparation of a financial blueprint of an organization's future
operations. The objective of financial planning is to ensure that enough funds are available at right time.
• Financial planning means deciding in advance the course of action to be undertaken in future with
respect to the financial management of a business enterprise. This function is mainly concerned with
the economical procurement and profitable use of funds. It involves the determination of objectives,
policies and procedures relating to the finance function.

3. FINANCIAL PLAN
• A financial plan is a statement estimating the amount of capital
and determining its composition.

5. OBJECTIVES OF FINANCIAL PLANNING
• To ensure availability of funds whenever required.
• To see that the firm does not raise resources unnecessarily.
• To minimize the cost of capital.
• To improve the profitability of the enterprise.
• To ensure the optimum use of funds.
• To provide sufficient liquidity throughout the year.

6. IMPORTANCE
• Helps in forecasting.
• Helps in coordination amongst various business functions.
• Detailed planning reduces wasteful activities.
• It tries to link the present with the future.
• It provides a link between investment and financing decisions on a continuous basis.
• By spelling out detailed objectives for various business segments, it makes the evaluation of actual
performance easier.

7. CAPITALIZATION
• Capital plays an important role in any business.
• Capital refers to long term indebtedness and includes both ownership capital and borrowed capital.
• Capital and capitalization are two different terms.
• The term capitalization is used only in relation to companies not in respect of partnerships or sole
proprietorship.
• Capitalization means total par value of all the securities i.e. shares and debentures issued by a company
and reserves and value of all long term obligations.
• Capitalization is thus the sum of all long term funds available to the firm along with the free reserves.