Identify the financial concept which refers to the preparation of financial blueprint of an organisation's future operation.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Financial Planning
Option (1) Financial Management — Incorrect. It chooses the best investment and financing alternatives by looking at their costs and benefits. It is not the blueprint of future operations.
Option (2) Financial Planning — Correct. Financial planning is the preparation of a financial blueprint of the organisation’s future operations. It makes sure enough funds are available at the right time.
Option (3) Financial Leverage — Incorrect. Financial leverage is the use of debt along with equity in the capital structure. It is not a blueprint of future operations.
Option (4) Trading on equity — Incorrect. Trading on equity means using fixed-cost debt to increase the earnings of the equity shareholders. It is not a blueprint of future operations.
NCERT (2026-27 Edition): “Financial Planning Financial planning is essentially the preparation of a financial blueprint of an organisation’s future operations. The objective of financial planning is to ensure that enough funds are available at right time. …” “…It must be kept in mind that financial planning is not equivalent to, or a substitute for, financial management. Financial management aims at choosing the best investment and financing alternatives by focusing on their costs and benefits. Its objective is to increase the shareholders’ wealth. …” |