Business Financing and the Capital Structure

Financial Planning in Business

Introduction

A business can only be able to achieve its goal if extensive planning is done before starting a business. Planning is to be done about all the aspects involved in a business, will it be financial, operational or marketing aspect. Financial Planning is collecting information, setting goals or targets, identifying financial problems, preparing a financial plan, implementing the plan and analyzing the plan implemented. Financial planning in a business is to analyze the cost and profit of inputs and outputs in a business, variables of cost and profit margins, identifying the break-even of the business, preparing budgets and using cash flow forecasting tool for business planning. The main objective of financial planning in a business is to identify the path of the business that will lead it towards a successful business in the world. The following report will give an analysis of the components of a business like cost and profit, break-even, budget and cash flow forecasting and how these planning tools assists a business in becoming successful.

Discussion

Cost and Profit

The main of objective of organisations is to minimize cost and maximize profits. Cost is the amount incurred in producing and selling the products. Cost includes both the input and output cost which can be fixed, variable or mixed cost. Input cost includes direct material, direct labor, direct expenses and production overhead; whereas output cost is the cost that includes packaging, advertising, insurance and other costs. Some of the input used by the firms is a fixed cost and this cost does not change with the increase in output. Firms in order to increase their output need to increase or invest in input. There is another cost that changes as output changes which is called marginal cost. Managers do a comparison between the input ...