Answer:
Importance of financial plan for the company
(i) Financial Planning ensures provision of adequate funds to meet working capital requirements.
(ii) It brings about a balance between in flow and out flow of funds and ensures liquidity throughout the year.
(iii) It solves the problems of shortage and surplus of funds and ensures roper and optimum utilization of available resources.
(iv) It ensures increased profitability through cost benefit analysis and by avoiding wasteful operations.
(v) It seeks to eliminate waste of funds and provides better financial control.
(vi) It seeks to avail the benefits of trading on equity.
Financial Plan of S Ltd
Total finance required: Fixed capital = rs. 1,000 crores
Working capital = rs. 100 crores
Source of finance: 2 : 1 Ratio i.e.,
50% finance collected by issue of shares and 50% by borrowed funds.
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