Financial Planning and Management

Arun Kumar Davay

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Meaning of Finance

"the provision of money at time it is wanted".

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Need for Finance

Fixed assets Current assets Establishment expenditure Cost of procuring finance Purchase of intangible assets Adopting modern technology Availing business opportunities Diversification of business Expanding existing business

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Financial Management

Acquisition of finance for assets Profit Maximization Wealth maximisation Minimisation of Risks Maintenance of liquid assets Easy availability of funds

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Entrepreneur and Financial Management

Establishing capital requirements Determining the composition of capital Determining the source of funds Disposal of profits Management of Cash Financial Control

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Financial Planning

Processing of Financial Planning :Estimating the amount capital to be raised, Determining the form and proportionate amount of securities to be issued Formulating policies for the administration of capital

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Factors affecting the formulation of a financial plan

Objective Solvency and liquidity Optimum structure Simplicity Provision for Contingencies

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Capital Structure

Factors affecting capital structure :Trading on equity Cost of Capital Stability of sales Cash flow ability of the enterprise Control Size of the enterprise Market Conditions

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Types of Business Finance

Fixed capital Working capital

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Factors determining the working capital requirements

Size of the business Nature of the business Length of Operating cycle Sales level Inventory policies Credit policy Efficiency of managing current assets Level of taxes

10

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Classification of Finance

(i) (ii)

Owners Capital and Borrowed Capital

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