Types of Financial Plans

After the company starts, the finance manager does the financial planning

The types of financial plans are depicted and briefly explained below.

types of financial plans

There are three types of financial plans:-,

    Short-term financial plan is prepared for maximum one year. This plan looks after the working capital needs of the company.

    Medium-term financial plan is prepared for a period of one to five years. This plan looks after replacement and maintenance of assets, research and development, etc.

    Long-term financial plan is prepared for a period of more than five years. It looks after the long-term financial objectives of the company, its capital structure, expansion activities, etc.

Financial Planning

What is Financial Planning? Meaning

Financial planning means to prepare the financial plan. A financial plan is also called Capital Plan.

A financial plan is an estimate of the total capital requirements of the company. It selects the most economical sources of finance. It also tells us how to use this finance profitably. Financial plan gives a total picture of the future financial activities of the company.

what is financial planning meaning

Financial Planning is the mathematical sum of following parameters:-

Financial Resources (FR) + Financial Techniques (FT) = Financial Planning.

A financial plan contains answers to the following questions:-

    How much finance (short-term, medium-term and long-term) will be required by the company?

    From where this finance will be acquired (gathered)? In other words, what are the sources of finance? That is, owned capital (promoter contribution, share capital) and borrowed capital (debentures, loans, overdrafts, etc.).

    How the company will use this acquired finance? That is, application or utilisation of funds.

Financial plan is generally prepared during promotion stage. It is prepared by the Promoters (entrepreneurs) with the help of experienced (practising) professionals. The promoters must be very careful while preparing the financial plan. This is because a bad financial plan will lead to over-capitalization or under-capitalization. It is very difficult to correct a bad financial plan. Hence immense care must be taken while preparing a financial plan.

Features of Finance

The main characteristics or features of finance are depicted below.

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1. Investment Opportunities

In Finance, Investment can be explained as a utilisation of money for profit or returns.

Investment can be done by:-

1.         Creating physical assets with the money (such as development of land, acquiring commercial assets, etc.),

2.         Carrying on business activities (like manufacturing, trading, etc.), and

3.         Acquiring financial securities (such as shares, bonds, units of mutual funds, etc.).

Investment opportunities are commitments of monetary resources at different times with an expectation of economic returns in the future.

2. Profitable Opportunities

In Finance, Profitable opportunities are considered as an important aspiration (goal).

Profitable opportunities signify that the firm must utilize its available resources most efficiently under the conditions of cut-throat competitive markets.

Profitable opportunities shall be a vision. It shall not result in short-term profits at the expense of long-term gains.

For example, business carried on with non-compliance of law, unethical ways of acquiring the business, etc., usually may result in huge short-term profits but may also hinder the smooth possibility of long-term gains and survival of business in the future.

3. Optimal Mix of Funds

Finance is concerned with the best optimal mix of funds in order to obtain the desired and determined results respectively.

Primarily, funds are of two types, namely,

1.         Owned funds (Promoter Contribution, Equity shares, etc.), and

2.         Borrowed funds (Bank Loan, Bank overdraft, Debentures, etc).

The composition of funds should be such that it shall not result in loss of profits to the Entrepreneurs (Promoters) and must recover the cost of business units effectively and efficiently.

4. System of Internal Controls

Finance is concerned with internal controls maintained in the organisation or workplace.

Internal controls are set of rules and regulations framed at the inception stage of the organisation, and they are altered as per the requirement of its business.

However, these rules and regulations are monitored at various intervals to accomplish the same which have been consistently followed.

5. Future Decision Making

Finance is concerned with the future decision of the organisation.

A "Good Finance” is an indicator of growth and good returns. This is possible only with the good analytical decision of the organisation. However, the decision shall be framed by giving more emphasis on the present and future perspective (economic conditions) respectively.

 Conclusion on Finance

Finance to be more precise is concerned with the management of,

1.         Owned funds (promoter contribution),

2.         Raised funds (equity share, preference share, etc.), and

3.         Borrowed funds (loans, debentures, overdrafts, etc.).

At the same time, Finance also encompasses wider perspective of managing the business generated assets and other valuables more efficiently.

What is finace?

• What is ther insurance?
• Type of insurance
• Fanancial Planning
• Feature of finance
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Most common type of insurance

There are many types of insurance in the market. Some are most common and some other are least. Out of those some insurance are most essential in our life .Now we read here about most common type of insurance.

Below you’ll find the most common types of insurance products on the market today:

    Home insurance:

 This insurance is also most common insurance. If there is some natural disaster is occurred at that time this insurance is used. This is split into buildings insurance and contents insurance. If you own your own house, then buildings insurance is normally required by your mortgage lender. In any event, it is a pretty good idea to have this type of insurance as a homeowner. Tenants, on the other hand, usually only have to purchase contents insurance as the landlord is normally responsible for insuring the building.

    Life insurance:

This one of the most common type of insurance .This type of insurance may help if there is sudden accident occurred in their life .This covers the life of the policy holder in the event of untimely death. Usually a lump sum is paid to beneficiaries upon the death of the policy holder.

    Health insurance:

Our life is not permanent .There is many ups and down in our life .Doing insurance for life save’s our life from life incident or from any type of fatal deases .We canot provide money easily in sudden accident at that time insurance only the way .This type of insurance enables us to seek private treatment for most types of illnesses and health problems. The benefits of having private treatment are having access to better facilities and also shorter waiting lists.

    Automobile insurance:

This insurance also called as vehicle insurance . This is used when there is sudden accident in our travel life . There is many more option for this insurance also.  A legal requirement for all drivers. Car insurance quotes can vary wildly and there are specialist insurers for certain categories of drivers and certain types of car.