Question

State any three points of importance of financial planning.

Answer 1

Financial planning plays a crucial role in an organisation’s success. Its importance can be highlighted by the following factors:

1. Helps in facing eventual situations: Financial planning helps in forecasting future situations. In this way, it prepares an organisation to cope with adverse situations more effectively.
2. Helps avoid surprises and shocks: Through financial planning, an organisation can identify potential fund shortages or surpluses before they arise. Therefore, it prepares the managers in advance for such situations.
3. Improves coordination: Through financial planning, business activities such as sales and production are coordinated more effectively. Such coordination ensures the smooth functioning of the business.