Page 6 - Lesson Note 3

(i) It helps in forecasting what may happen in future under

differentperiod. Financial planning includes both short-term as
well as long-term planning. Long-term planning relates to long

term growth and investment. It focuses on capital expenditure
programmes. Short-term planning covers short-term financial

plan called budget.

(ii) It helps in avoiding business shocks and surprises and helps the

company in preparing for the future.

(iii) If helps in co-ordinating various business functions, e.g., sales

and production functions, by providing clear policies and
procedures.Detailed plans of action prepared under financial

planning reduce waste, duplication of efforts, and gaps in
planning.

(iv) It tries to link the present with the future.

(v) It provides a link between investment and financing decisions

on a continuous basis.

(vi) By spelling out detailed objectives for various business
segments, it makes the evaluation of actual performance

easier.