Understanding Financial Planning

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Questions and Answers

What does financial planning do?

Formulates the way in which financial goals are to be achieved.

What is a financial plan?

A statement of what is to be done in the future.

What is the appropriate goal for a financial manager?

Increasing the market value of the owner’s equity.

Why do many decisions in financial planning have a long lead time?

Because they take a long time to implement. Signup and view all the answers

What is growth in financial management considered as?

A desirable consequence of good decision making but not an end unto itself. Signup and view all the answers

How should the future be considered for planning purposes?

As having a short-run and a long-run. Signup and view all the answers

What is the typical time frame for short-run financial planning?

The typical time frame for short-run financial planning is the coming 12 months. Signup and view all the answers

What is the purpose of aggregation in the financial planning process?

The purpose of aggregation is to determine the total needed investment by adding up all individual investment proposals, treating it as one big project. Signup and view all the answers

What are the benefits of financial planning?

Financial planning provides a rational way of planning options or alternatives, analyzing different scenarios, and evaluating the impact on shareholders. Signup and view all the answers

How does financial planning help in examining interactions between investment proposals?

Financial planning enables the explicit examination of linkages between investment proposals for different operating activities of the firm and its available financing choices. Signup and view all the answers

What is the time frame for long-run financial planning?

The typical time frame for long-run financial planning is the coming two to five years. Signup and view all the answers

How does financial planning help in identifying possible problems?

Financial planning helps to identify what may happen to the firm if different events take place and addresses what actions the firm can take. Signup and view all the answers

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