Financial planning and estimation of finance required for the organisation
Any activity in a business enterprise requires planning for proper execution in time. Finance is required for any activity at least in the beginning and hence financial planning is the prime function of “Finance”. This involves detailed study of any activity from understanding the total funds requirement for that activity, when the funds will be required and how much funds will be required at different stages. For a new enterprise the entire resources have to come from outside (externally); for an existing enterprise, a part of the resources at least will be available from the profits made in the past and retained in business after declaring dividend.
We require Rs. 200 lacs for an activity. Let us see how it affects an existing enterprise. Let us assume the profits available to be Rs. 60 lacs. Then we require further resources of Rs. 140 lacs only. This is the difference between an existing enterprise and a new one. Financial planning will take this into account.
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