Question: What are the principles governing a financial plan?
Answer: 1. Simplicity: The financial plan should envisage a simple financial structure capable of being managed easily. 2. Long- term view: The financial plan should be formulated and conceived by the promoters/ management keeping in view the long- term needs of the company rather than finding out the easiest way of obtaining the original capital. 3. Foresight: The financial plan should be prepared keeping in view the future requirements of capital for the business. 4. Optimum Use: The financial plan should provide for meeting the genuine needs of the company. The business should neither be starved of funds nor should it have unnecessary spare funds, wasteful use of capital is as bad as inadequate capital. 5. Contingencies: The financial plan should keeping view the requirements of funds for contingencies. 6. Flexibility: The financial plan should have a degree of flexibility also.It is helpful in making changes or revising the plan according to pressure of circumstances with minimum possible delay. 7. Liquidity: Liquidity is the ability of the enterprise to make available the ready cash whenever required to make disbursement. 8. Economy: The cost of raising the required capital should be the minimum. It should not impose disproportionate burden on the company.
Question:
What are the principles governing a financial plan? Answer:
1. Simplicity: The financial plan should envisage a simple financial structure capable of being managed easily. 2. Long- term view: The financial plan should be formulated and conceived by the promoters/ management keeping in view the long- term needs of the company rather than finding out the easiest way of obtaining the original capital. 3. Foresight: The financial plan should be prepared keeping in view the future requirements of capital for the business. 4. Optimum Use: The financial plan should provide for meeting the genuine needs of the company. The business should neither be starved of funds nor should it have unnecessary spare funds, wasteful use of capital is as bad as inadequate capital. 5. Contingencies: The financial plan should keeping view the requirements of funds for contingencies. 6. Flexibility: The financial plan should have a degree of flexibility also.It is helpful in making changes or revising the plan according to pressure of circumstances with minimum possible delay. 7. Liquidity: Liquidity is the ability of the enterprise to make available the ready cash whenever required to make disbursement. 8. Economy: The cost of raising the required capital should be the minimum. It should not impose disproportionate burden on the company. Source: CoolInterview.com
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