Hello. What is a financial plan? A financial plan is a document. Which includes a person’s current wealth status and long-term monetary goals as well as a strategy to achieve those goals. A financial plan can be made independently or with the help of a certified financial planner. This is one of the most important functions of a financial manager. To prepare these plans, we have to first take the help of 5 steps. Which is below.
Note: Development of a financial plan calls for good planning, that is, what should be done in the future? and what to decide beforehand. This program and budget are to be developed in the production, marketing, personnel, and other functional areas of an organization. Which it must be seen in formulating the financial plan of a corporation, the many relationships which are fundamental to the success of the scheme. The following elements are fundamental to the success of a plan.
What are the Five steps in the financial planning process?
It is a necessary pre-requisite, the supplier of communication funds with all investors and other parties including others. Then the outside parties will know that management is trying to control their business effectively. And what he is doing. This is also of some psychological benefit to the firm. This point holds its element in finance planning.
2. The implementation
A firm must see that plans are actually carried out. It is very important to decide whether It is mandatory to be available in detail and in a definite form with the schemes at any level of statistics. This enables a firm to take timely and corrective actions whenever necessary. This point holds its element in finance planning.
The capital structure of a firm should be such that, to ensure that control does not go into the hands of outsiders. The security of your financial planning should be in the hands of others. For this purpose, the use of debt financing may be encouraged. In addition, the stock should be broadly distributed to facilitate maintenance of control. And protective restrictions on debt preferred stock should be reduced as far as possible. This point holds its element in finance planning.
Financial planning is an important element in the cost of capital construction. There should be a plan for paying off the old debate. When finance is available at a cheaper rate. Then the average cost of capital of a firm should be at least. The excessive burden of fixed fees on its earnings can increase its cost of capital. And moreover, it must ensure that its solvency is intact, so that its image in financial circles is improved, and funds are available for it on very reasonable terms. This point holds its element in finance planning.
5. The Risk
“Risk” or the thing we identify everywhere, like there are different types of risk, but the financial manager is more. And is concerned about financial risk created by a higher debt-equity ratio than any other risk. If income is high, the financial risk may not have much effect. In other words, if the economic risks of business activities are minimized, then a firm cannot be exposed to financial risks. And its refinancing should be planned in such a way that the effects of those risks are not seriously felt.
And for all these purposes, the financial manager can appoint multiple securities of each type with different restrictions and benefits. And future changes in their relative positions may be for the benefit or disadvantage of the security holders. Her condition is also referred to as “vulnerability risk”. The financial manager should tell his firm’s financial plan about the various risks involved. Which may be contained therein. This point holds its element in finance planning.
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