Question

1. Explain your analysis, why organization having importance of following functions of financial management?                                                                                                                                                                       

                                                     

1. Financial Planning and Control

Answer 1

Solution) Financial planning and control is important for an organization because of the following reasons:

1) It helps the firms to have optimum capital structure: An organization raises funds in the form of equity or debt. Since the cost of debt and equity is different and also, debt has tax advantages, thus, having an optimum mix of these funding is very important.

2) It also helps in managing the investments made by the organizations. Financial planning is very helpful in allocating the funds in the various investment opportunities of the firm.

3) It also helps in keeping the profits in line with the estimated profits. It includes comparing the actual revenues from the project with the estimated revenues from the project. If the actual revenues are less than the estimated revenues, then, company can take appropriate measures to improve the revenue.

4) It also helps in forecasting sales and costs for the organizations.