Sanchit was developing a business plan for his organization. While working on the financial plan he realised that his financial requirements will be for fixed assets and their installations, preliminary expenses, working capital, expenses on research and development and investment in short-term assets viz. raw material, level of cash, etc. To decide on the sources of funds for the venture, he tried to ensure the selection of the best overall mix of financing for the enterprise. Identify the element of financial plan discussed here.

Proforma investment decision Proforma financing decision Both A and B Neither A nor B

Both A and B

Proforma investment decisions: This part of financial plan relates to how the enterprise's funds are invested in different assets so that the enterprise is able to earn the highest possible returns on investment. An estimate of various components of capital nature i.e. fixed assets and of working capital should be clearly mentioned in this part of business plan. Proforma financing decisions: This section summarizes all the projected sources of funds available to the venture to raise finance from. Typically, sources of funds are: i) owners i.e. Owner's funds ii) outsiders i.e. Borrowed funds. The entrepreneur's job is to ensure the selection of the best overall mix of financing for the enterprise so that: a) the cost of capital and the financial risk stands minimized, b) return on investment and profitability stands maximized.