Ramnath Ltd, is dealing in import of organic food items in bulk. The company sells the items in smaller quantities in attractive packages. Performances of the company has been up to the expectations in the past. Keeping up with the later packaging technology, the company decide 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 remaining funds he is trying to find out alternative sources.
Identify the financial concept discussed in the above paragraph. Also state any two point of importance of the financial concept, so identified.

Explanation

Financial planning is the process of estimating the requirements of funds to carry out the operations of enterprise. Importance of financial plannning are :
(i) It helps in forecasting what may happen in future business situations.
(ii) It provides a link between investment and financing decision on a continuous basis.