Financial planning is the process of compiling and analysing companies’ long-term financial strategy.
It is a combined effort of preparing management reports, analysing financial trends, calculating the monetary effects of potential business decisions and helping the company’s leaders in taking decisions.
Why is financial plan required?
Take an example that a company is going to acquire another company.
The biggest challenge seems to be that how the acquiring company is going to finance the acquisition cost; it may be debt financing, or raising funds from public in public issue, raising funds on preferential basis from institutions or doing right issue from existing shareholders.
Every mode has its own repercussions.