2.1 Financial Planning + Business Summaries

Essay by maryyHigh School, 12th gradeB+, April 2008

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2.1Financial Planning1. Role of financial planning•to provide availability of funds and resources to achieve business goals2. Strategic role of financial planning•is the process of setting up objectives throughout the business and deciding what resources will be needed to achieve these objectives3. Financial management•has a strategic role in the sense that this planning is taken place in a dynamic environment-5 Objectives of Financial Planning1. Liquidity•ensures business can pay its short term debts2. Efficiency•to achieve lower costs by getting greater output from inputs such as labour and machinery•lower costs that result from increased output from the same amount of input3. Growth•to increase the value of the business by expanding the business•example: acquisition, which is meant by buying another business•growth is needed to attract investors4. Return on capital•increase the return from the use of resources such as land and labour5. Profitability•owner expects a competitive return in their investment from the risks they take•these type of returns are called profitability-Planning cycle•refers to the continuous series of financial activities that take place in a business that ensures a business adapts to a changing environment1.

Addressing the present financial position•Concerned with the assessment of the business's financial resources, particularly its cash flows•Cash flows is the movement of cash inflows and outflows of the business2. Determining the financial element of the business plan•Concerned with providing the resources needed to implement the plan3. Developing budgets•Budgets provide specific details for the plan•Shows where money will come from and what it will be spent on4. Cash flows•Most important aspect of the planning cycle•It is the movement of cash inflows and outflows of the business5. Financial reports•Standardized reports that summarize the financial activities of the business that are prepared for stakeholders•These reports include: balance sheet, revenue statement and statement of cash flows6. Interpretation•Standardized reports are general reports•General reports need to be...