Explain the factors affecting the formulation of a financial plan?
Answers
The factor affecting financial plan of the business is determined by the following factors. Purpose. The purpose of the financial plan should be consistent with the overall goals of the business. The main objective of the financial plan is to raise funds at a reasonable cost and make use of it as much as possible
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The factor affecting financial plan of the business is determined by the following factors.
Purpose. The purpose of the financial plan should be consistent with the overall goals of the business. The main objective of the financial plan is to raise funds at a reasonable cost and make use of it as much as possible.
Company requirements. A good financial plan should handle the current and future requirements of the business. The provision of various contingencies, asset replacement, corporate growth, and diversification must be done.
Economy. In the case of capital procurement, it must be reasonable. The capital structure should be such as to provide an appropriate balance between funding costs and the company's ability to pay.
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Solvency and liquidity. Funds should be invested in venture companies that are likely to provide an adequate return on investment. Furthermore, in order to meet the requirements of the company, it is necessary to always prepare appropriate cash. Companies must be solvent and liquid not only in the short term but also over the long term.
Flexibility. The financial plan should ensure the flexibility to enable the conversion of funds to more profitable channels. Also, preparations for additional funding should be done in a short period of time.
Optimal capital structure. The company should have the proper qualification. The optimal combination of capital, preferred stock, and corporate bonds should be maintained centrally while maintaining funding in different resources.