Which concept of financial management takes into consideration the growth, performance, investments, and requirements of funds for a given period?

Financial planning

* A proper matching of funds requirements and their availability is sought to be achieved by financial planning. This process of estimating the fund requirement of a business and specifying the sources of funds is called financial planning. Financial planning takes into consideration the growth, performance, investments and requirement of funds for a given period. Financial planning includes both short-term as well as long-term planning. Long-term planning relates to long term growth and investment.

* Capital structure refers to the mix between owners and borrowed funds. These shall be referred as equity and debt in the subsequent text. It can be calculated as debt-equity ratio.

* Fixed capital refers to investment in long-term assets. Management of fixed capital involves the allocation of a firm’s capital to different projects or assets with long-term implications for the business. These decisions are called investment decisions or capital budgeting decisions and affect the growth, profitability, and risk of the business in the long run. These long-term assets last for more than one year.

* With higher use of debt upto a point, the difference between RoI and cost of debt increases the EPS. This is a situation of favourable financial leverage. In such cases, companies often employ more of cheaper debt to enhance the EPS. Such practice is called Trading on Equity.