Advanced Financial Functions and the Importance of Planning

This essay emphasizes the importance of financial planning as an evaluation of current income and future financial objectives. It highlights the role of financial planning in determining strategic outlines for a company's future prospects by identifying targets and goals. The essay discusses how financial planning helps identify capital requirements and relevant factors, enabling companies to utilize assets efficiently and increase stakeholder wealth. It also covers the significance of aligning financing decisions with desired goals and risk profiles, considering both business factors and macroeconomic conditions. Furthermore, the essay suggests using financial planning as a capital budgeting perspective, evaluating projects based on investment goals, cash flows, and net present value. Ultimately, it concludes that financial planning aids in setting and achieving company goals, creating a balanced approach to meeting objectives and managing organizational resources effectively.

Running head: ADVANCED FINANCIAL FUNCTIONS
Advanced Financial Functions
Name of the Student;
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Author’s Note:

1ADVANCED FINANCIAL FUNCTIONS
Importance of Financial Planning
Financial Planning is a type of evaluation of individual’s current income and the
future financial objectives and goals and the achievement of the same with the investible
amount of capital. The financial planning plays a key role in determine the strategic outline
for the future prospect of the company by identifying the set of target and goals to be met by
the company. Financial planning will help the company identify the amount of capital
required and the relevant factors involved in the same (Ehrhardt and Brigham 2016).
The management of the company needs to emphasise on the future sustainability of
the company and the same can be forecasted. The management of the company needs to
identify the key problems and study the cause and effect relationship in the company which
involves the key factors of the company. The creation of an optimum financial plan will help
the company utilize the key asset of the company and create wealth for the stakeholders of
the company by increasing the efficiency ratio of the company. The financing decision should
be primarily reflective of the desired goals and objective and the risk and return characteristic
of the asset class should match with the investors risk return profile (Fracassi 2016). The
financing decisions for the company should be primarily dependent on two main pillars,
which the business factors and the macro–economic conditions under which the company
operates. The variability in the key macro and business factors will affect the financial
planning of the company and similarly the investments. Companies should start involving the
usage of financial planning as a capital budgeting perspective where the asset class or the
project should be undertaken based on the investment goals. The cash flows and the required
rate of return for the project are forecasted and calculation of net present value for the
company serves as the common evaluation criteria for investment (MARAN and NEDELEA
2017).

2ADVANCED FINANCIAL FUNCTIONS
Financial Planning helps identify goals and objectives of the company and the same
can create a balance plan for the company in meeting the goals of the company. The main
purpose of the financial statement is to create an outlay for the company financials goals and
the ways in which the company will achieve the same. Establishing and identifying the goals
of the company, key operational fixed expenses, sources of revenue and variability in the net
income of the come will help them forecast the condition and factors, which play an
important role in determining the future performance of the company. There are other
benefits which help the company in certain other areas with the help an creation of the
financial planning for the company that is the risk management, retirement planning and
investment planning needs of the company. Thus financial planning and forecasting the
performance of the company will be a key reason for successful implementation of in
managing the resources of the organisation thereby deriving operational efficiency from the
same.

3ADVANCED FINANCIAL FUNCTIONS
Reference
Ehrhardt, M.C. and Brigham, E.F., 2016. Corporate finance: A focused approach. Cengage
learning.
Fracassi, C., 2016. Corporate finance policies and social networks. Management Science,
63(8), pp.2420-2438.
MARAN, R.M. and NEDELEA, A.M., 2017. CORPORATE FINANCE THEORIES AND
PRINCIPLES: REDUNDANT. Ecoforum Journal, 6(2).
Zopounidis, C. and Galariotis, E., 2015. Quantitative Financial Risk Management: Theory
and Practice. John Wiley & Sons.