Tag: financial planning

Questions Related to financial planning

Financial planning arrives at __________________.

commerce business finance financial planning financing financial management

  1. Minimising the external borrowing by resorting to equity issues

  2. Entering that the firm always have significantly more fund than required so that there is no paucity of funds

  3. ensuring that the firm paces neither a shortage nor a glut of unuable funds

  4. doing only what is possible with the funds that the firm has at tis disposal

Show answer
Correct Option: A
Explanation:

Financial planning aims at ensuring that the firm faces neither a shortage nor a glut of unusable funds. If there is shortage of funds then the firm will not be able to carry out its planned activities and commitment. On the other hand if there is excess funds available then it adds to cost of business which encourages waste of funds. Thus, financial planning focuses on ensuring the availability of just enough funds at right time.

The difference between current assets and current liabilities is:

commerce business finance financial planning financing financial management

  1. Gross working capital

  2. Net working capital

  3. Permanent working capital

  4. Temporary working capital

Show answer
Correct Option: B

Plans made for a period of _____ year or less is termed as budget.

commerce business finance financial planning financing financial management

  1. one

  2. two

  3. three

  4. four

Show answer
Correct Option: A
Explanation:

A budget is a financial plan for a defined period of time, usually a year.

A budget is the sum of money allocated for a particular purpose and the summary of intended expenditures along with proposals for how to meet them. It may include a budget surplus, providing money for use at a future time, or a deficit in which expenses exceed income.

________ funding is almost as bad as inadequate funding.

commerce business finance financial planning financing financial management

  1. Limited

  2. Short

  3. Excess

  4. Long

Show answer
Correct Option: C
Explanation:

Excess funding is almost as bad as inadequate funding. Funding involves cost like interest on loans which is a burden on the company.

Excess funding will result in excess interest on capital which is a negative impact on the company's financial position.

Financial planning usually begins with the preparation of a _______ forecast.

commerce business finance financial planning financing financial management

  1. purchase

  2. sales

  3. cash

  4. budget

Show answer
Correct Option: B
Explanation:
Financial planning usually begins with the preparation of a sales forecast.
It starts with an estimate of the sales which are likely to happen in the next five years. Based on these, the financial statements are prepared keeping in mind the requirement of funds for investment in the fixed capital and working capital. Then the expected profits during the period are estimated so that an idea can be made of how much of the fund requirements can be met internally i.e. through retained earnings. This results in an estimation of the requirement for external funds. Further, the sources from which the external funds requirement can be met are identified and cash budgets are made, incorporating these factors.

Financial planning helps in coordinating _________ business functions.

commerce business finance financial planning financing financial management

  1. one

  2. two

  3. various

  4. three

Show answer
Correct Option: C
Explanation:
Financial planning is an important part of overall planning of any business enterprise. It aims at enabling the company to tackle the uncertainty in respect of the availability and timing of the funds and helps in smooth functioning of an organisation.

Financial planning tries to link the ______ with the ______.

commerce business finance financial planning financing financial management

  1. future, present

  2. present, past

  3. present, future

  4. past, future

Show answer
Correct Option: C
Explanation:

Financial Planning is the process of estimating the capital required and determining it’s competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise. Financial planning relates present financial requirement with future requirement by anticipating the sales and growth plans of the company.

_________ plan of action prepared under financial planning reduces waste, duplication of efforts, and gaps in planning.

commerce business finance financial planning financing financial management

  1. Detailed

  2. Short

  3. General

  4. Basic

Show answer
Correct Option: A
Explanation:
Financial plan is a comprehensive evaluation of an individual's current pay and future financial state by using current known variables to predict future income, asset values and withdrawal plans.
Therefore detailed plan of action is prepared under financial planning reduce waste, duplication of efforts, and gaps in planning.

Working capital is _______________.

commerce business finance financial planning financing financial management

  1. net current assets

  2. net working capital

  3. gross cash inflow

  4. Either (a) or (b)

Show answer
Correct Option: D

Working capital is _________.

commerce business finance financial planning financing financial management

  1. gross cash inflow

  2. net cash inflow

  3. gross cash outflow

  4. net cash outflow

Show answer
Correct Option: B,D