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

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

Financial planning means estimating how much money the firm needs, when it is needed and from which sources it will be raised, so that business objectives are met. Bookkeeping, tax computation and audit reporting are other functions and do not capture this forward-looking purpose.

  1. AEstimating the funds required and deciding the timing and sources of raising them to meet business objectivesCorrect
  2. BRecording all completed transactions in the books of account
  3. CDetermining the income tax payable for the year
  4. DPreparing the statutory audit report

Explanation

Financial planning is about forecasting fund requirements, deciding the capital structure and fixing when and from where funds will be raised. Recording transactions is accounting, tax computation is a compliance task, and audit reporting is an assurance function, so none of these describes planning.

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