Question

Financial planning arrives at

(a) minimising the external borrowing by resorting to equity issues

(b) entering that the firm always have significantly more fund than required so that there is no paucity of funds

(c) ensuring that the firm faces neither a shortage nor a glut of unusable funds

(d) doing only what is possible with the funds that the firms has at its disposal

Answer 1

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