Mark Anthony R. Casanova
Kiyoung Jung (Justin)
2.2 Explain the importance of financial planning
The importance of financial planning for the business is best seen when a company is faced with a situation concerning outstanding debts and rising cost. So to be able to be prepared for the situation in advance, the company should have prepared a proper financial plan beforehand. The success of a business is greatly determined by the financial plans they have laid out and how well it is followed to support their business plan.
Wealth maximization is the main goal of a financial plan. Wealth maximization is simply explained as maximization of the shareholder. The strategy of wealth …show more content…
Cost management is another side of way increasing profitability of product. Cost management should be one of important part of strategy for the company. The objective of cost management is to ensure sufficient supply of finances from the right source to the company. Therefore, before gaining finances form certain sources, there should be analysis of cost benefits and several alternative sources. And, the cost and expense will be recorded while the project of business is proceeding to make sure that the cost is in right track with the cost management plan. When the project is done, the costs will be compared with the expected costs.
There are some different ways to improve profitability. The first step is to create a financial plan. You should know the approximate revenue that you want to earn in each month, and know how much your expense will be. The second step is to review and update the plan. You have to be reviewing and updating the financial plan every month, every week and every day. Because things always change, you need to review the plan and change it. The third step is to make adjustment immediately. When the revenue is lower than what you expected, you should try to find out ways to make increases in revenue. When the overhead