This document provides an overview of financial planning. It defines financial planning as determining a firm's financial objectives, policies, and procedures. The objectives of financial planning are to minimize the cost of capital, ensure simplicity and liquidity in the capital structure, and provide adequate but not excessive funds. Financial planning can be short, medium, or long term. Key steps are determining objectives, formulating policies and procedures, and providing flexibility. Factors like the nature of business and management attitudes also affect financial planning. Financial planning helps with efficient operations, capitalization, utilization of funds, and business expansion. Limitations include forecasts not always being accurate and difficulty changing plans once set.

1. FINANCIAL PLANNING
Presented by:- 1-Nikhil Sharma
2-Archit Mishra
MBA FT 2ND sem (2014-2016)
IBM CSJM University Kanpur

2. MEANING OF F.P.
 Financial planning is an important function of
financial management. This function has to be
performed whether the business is big or small.
Similarly , a new as well as an existing business must
perform this function very carefully because it is
concerned with the procurement and effective
utilization of funds. A carefully prepared financial plan
will not only ensure the economical and sufficient
procurement of funds but their proper utilization also.

3. DEFINITION
“Financial planning pertains to the function of finance
and includes the determination of the firms’ financial
objectives, financial policies and financial procedures.”
-Walker and baughn

4. Objectives of Financial planning
 To raise the funds in a manner that the cost of capital
is minimum.
 To ensure simplicity in the capital structure.
 To ensure sufficient liquidity of funds.
 To provide adequate funds to the business. Neither the
funds should be short nor in excess of the needs of the
business.
 To ensure flexibility in capital structure so that
changes in the sources of funds may be made
according to the changing conditions.

5. Types of Financial planning
 Short term planning
 Medium term Financial planning
 Long term financial planning

6. Steps in financial planning
 Determination of financial objectives
 Formulation of financial policies
 Formulation of procedures
 Provision of Flexibility

7. Principal of a sound Financial
Planning
 A financial plan should be so simple that it may be
easily understood by everyone. It should have a simple
capital structure capable of being manage easily.
 The financial plan should prepared keeping in view
the future needs of business.
 An ideal financial plan should always aim at the best
possible and intensive use of all available resources of
finance.
 Financial plan must be prepared in such a way that
cost of capital is minimum.

8. Conti…..
 A financial plan should be sufficiently flexible. It
should be possible for a company to change its
financial plan with minimum cost and delay it
warranted by changed circumstances.
 A Financial plan should keep in view the requirement
of funds for contingencies. Contingencies means the
requirement of funds for unseen events.

9. Factors Affecting Financial Planning
 Nature Of Business
 Degree of Risk
 Standing of the concern
 Plans for future growth
 Alternative source of management
 Atitude of management
 Government policies and control

10. Significance of financial planning
 Helpful in the efficient operation of business activities.
 Helpful in proper capitalization
 Helpful in optimum capital structure
 Helpful in proper utilization of funds
 Helpful in the expansion of the business

11. Limitations of Financial Planning
 Financial plan is based on forecast of future
conditions.
 Once a financial plan is prepared, it becomes quite
difficult to change it.
 Assets involving huge capital might have been
purchased and raw material, labor and other costs
might have been incurred.
 Sometimes the changes in financial plan also becomes
difficult due to rigid attitude of management.

12. THANK YOU