Question

Identify five key processes that are considered the most significant financial issues that must be planned, controlled, and managed for a plan to be successful.

Answer 1

Solution:-

The five key financial issues that are at the core of a plan's success are identified are as follows:-

1. Effective analysis and estimate of the plan's financial requirements. Major variations during the execution stage could potentially derail the plan, therefore it is of utmost importance that the management correctly estimates the investment that will be required to execute the plan.
2. Process of arrangement of funds needed. This goes without saying that management can't reach execution stage unless they have gained access to funds required by them.
3. Cost of capital for the plan must be minimum possible. This includes ensuring an optimal capital structure for the plan, such that the cost of funds to be incurred is the minimum possible.
4. Generation of returns on invested capital. The management must ensure that the plan generates enough returns to not only cover the cost of funds but add value as well.
5. Managing liquidity is another important process that forms part of any plan. The management must ensure that the firm has enough immediate liquidity to run operations smoothly, and at the same time any excess funds are being parked in high return generating assets rather than lying idle. The process must maintain the required balance in this regard.