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Financial Planning for an Organisation - Coggle Diagram
Financial Planning for an Organisation
Importance of Cash Flow-
Keeps business running smoothly
Ensures bills, wages, and suppliers are paid
Prevents liquidity problems
Planning Future Cash Flow-
Anticipates shortages/surpluses
Helps decision-making
Supports business growth
Consequences of Poor Cash Flow-
Inability to pay debts
Risk of insolvency/bankruptcy
Damaged reputation/credit rating
Working Capital-Definition- Definition: Current Assets – Current Liabilities
Indicator of short-term financial health
Effective Working Capital Management-
Balance between liquidity & profitability
Avoids overtrading
Efficient use of resources
Cash Flow Budget-
Planning tool (forecast inflows/outflows)
Analyses performance vs forecast
Helps secure finance
Sources of Finance-
Short-term: overdraft, trade credit
Medium-term: leasing, hire purchase, medium-term loans
Long-term: share capital, retained earnings, debentures
Matching Finance to Needs-
Short-term needs (working capital, stock)
Medium-term needs (equipment, vehicles)
Long-term needs (premises, expansion)
Factors Influencing Choice of Finance-
Cost of finance
Availability & conditions
Control/dilution of ownership
Risk & repayment capacity