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CS Executive · Corporate Accounting and Financial Management · Introduction to Financial Management

Which of the following best describes the primary objective of financial planning in a company?

Financial planning aims to ensure that adequate funds are available at the right time and at a reasonable cost. It estimates requirements and sources in advance, avoiding both shortage and idle surplus, rather than chasing short-term profit or avoiding borrowing altogether.

  1. AEnsuring that the right amount of funds is available at the right time and at a reasonable costCorrect
  2. BMaximising the current year's accounting profit irrespective of risk
  3. CMinimising the number of shareholders in the company
  4. DEliminating the need for any external borrowing

Explanation

Financial planning estimates funds required and decides their timing and sources so that the firm neither runs short nor holds idle surplus. Maximising current profit ignores risk and timing, so it is not the planning objective.

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