Question

Explain the importance of financial planning.

Hint:

Financial planning = right funds at right time → ensures smooth operations, growth, and profitability.

Answer 1

Financial planning means estimating the financial requirements of an organisation and deciding on the sources and proper utilisation of funds. It ensures that adequate funds are available for different purposes at the right time.
Importance of Financial Planning:

Ensures Adequate Funds: Helps in forecasting financial needs and ensures funds are available when required.
Avoids Wastage: Prevents shortage or surplus of funds by proper allocation.
Helps in Smooth Operations: Ensures timely availability of money for production, marketing, and expansion.
Facilitates Growth: Provides for future needs like expansion, diversification, and modernization.
Improves Profitability: Funds are invested in the most profitable projects, increasing returns.