Master the art of guiding, coordinating, and controlling financial actions to achieve objectives
Financial planning involves guiding, coordinating, and controlling the firm's actions to achieve its objectives. Two key aspects of financial planning are cash planning and profit planning.
Key Insight:
Financial planning is essential for effective business management as it provides a roadmap for achieving financial goals and maintaining financial stability.
Cash Planning
Involves the preparation of the firm's cash budget to estimate short-term cash requirements
Profit Planning
Involves the preparation of both cash budgets and pro forma financial statements
Pro Forma Statements
Projected or forecast financial statements - income statements and balance sheets
Cash Budget
A statement of the firm's planned inflows and outflows of cash
Sales Forecast
The foundation of financial planning, predicting sales activity for a given period
Budget Preparation
Developing detailed plans for income, expenses, and cash flows
Financial Analysis
Evaluating financial performance and making necessary adjustments