Ramanath Ltd. Is dealing in important of organic food item in bulk. The company sells the items in smaller quantities in attractive pakages. Performance of the company has been up to the expectations in the past. Keeping up with the latest packaging technology. the company decided to upgrade its machinery. For this, the finance Manager of the company, Mr. Vikrant Dhull, estimated the amount of funds required and the timings.This will help the company in linking the investment and the financing decisions on a continuous basis.
Therefore, Mr. vikrant Dhull began with the preparation of a sales forecast for the next four years. He also collected the relevant data about the profit estimates in the coming years. By doing this , he wanted to be sure about the availability of funds from the internal sources. For the ramaining funds he is trying to find out alternative sources. Identify the financial concept discussed in the above paragraph. Also state any two points of importance of the financial concept, so indetified.

Explanation

Financial planning
Importance of Financial planning (any two):
(a) It helps the company to prepare for the future by forecasting what may happen in the future under different business situations.
(b) It helps in avoiding business shocks and surprises.
(c) It helps in co-ordinating various business functions by providing clear policies and procedures.
(d) It helps in reducing waste, duplication of efforts, gaps in planning and confusion.
(e) It links the present with the future.
(f) It provides a link between investment financing decisions.
(g) It serves as a control technique as it makes evaluation of actual performance easier.