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Question : 33
Total: 39
Harish is working as a finance manager in 'Kozee Softwares Ltd.' He has been awarded 'Best employee of the year Award' because of his foresightedness. He always aims at smooth operations of all the financial activities by focusing on fund requirements and their availability in the light of financial decisions. He takes into consideration the growth, performance, investments and requirement of funds for a given period so that financial resources are not left idle and don't unnecessarily add to the cost.
By doing all this Harish strives to achieve the two main objectives of an important concept of financial management. Identify the concept and explain its two objectives.
By doing all this Harish strives to achieve the two main objectives of an important concept of financial management. Identify the concept and explain its two objectives.
Solution:
The concept that followed here is financial planning. It involves the preparation of a financial blueprint of an organisation. It is the process of estimating the fund requirement of a business and determining the possible sources from which it can be raised.
Financial planning includes:
(a) Determination of amount of finance needed.
(b) Determination of sources of funds.
(c) Determination of suitable policies for proper utilisation of funds.
Objectives of Financial Planning:
(i) To ensure availability of funds whenever required: It includes proper estimation of the funds required for different purposes (long term assets/working capital requirement). There is a need to estimate the time at which these funds are to be made available.
Financial planning also tries to specify possible sources of these funds.
(ii) To see that the firm does not raise resources unnecessarily: Excess funding is as bad as inadequate funding. Surplus funds reduce return and increases cost to a company.
Financial planning includes:
(a) Determination of amount of finance needed.
(b) Determination of sources of funds.
(c) Determination of suitable policies for proper utilisation of funds.
Objectives of Financial Planning:
(i) To ensure availability of funds whenever required: It includes proper estimation of the funds required for different purposes (long term assets/working capital requirement). There is a need to estimate the time at which these funds are to be made available.
Financial planning also tries to specify possible sources of these funds.
(ii) To see that the firm does not raise resources unnecessarily: Excess funding is as bad as inadequate funding. Surplus funds reduce return and increases cost to a company.
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