Concept Of The Financial Plan
The financial plan refers to the projection of future financial course of action to be carried for efficient execution of operating plans and effective accomplishment of corporate objective. Financial plan begins with the preparation of strategic plans that in turn guides the formulation of operating plans and budgets. Financial plan provides road map for guiding, coordinating and controlling firm's financial action in order to achieve the objectives.
Therefore, a plan that spells out future course of action, budgets and capital expenditures required for execution of operating plans is known as financial plan.
Objectives Of The Financial Plan
Most corporate organizations spend significant time and labor in preparing the financial plan as it enables a firm:
* To identify significant actions to be taken in various aspects of firm's finance functions.
* To develop various options in the field of finance functions, which can be exercised as condition change.
* To state clearly the relationship between present and future financial decision.
* To systematize the interaction required between investment and financing decision.
* To ensure that the strategic plan of the firm is financially viable.
* To provide standard against which future financial performance is compared.