Consider the following statements about financial planning and financial management:
(A) Financial planning aims at smooth operations by focusing on fund requirements and their availability.
(B) Financial management aims at choosing the best investment and financing alternatives by focusing on their costs and benefits.
(C) Financial planning aims at choosing the best investment and financing alternatives by focusing on their costs and benefits.
(D) The objective of financial planning is to increase the shareholders’ wealth.
Which of the statements given above are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A) and (B) only
(A) Financial planning aims at smooth operations by focusing on fund requirements and their availability. — Correct. Financial planning makes sure enough funds are available at the right time, so the work runs smoothly.
(B) Financial management aims at choosing the best investment and financing alternatives by focusing on their costs and benefits. — Correct. Financial management compares the costs and benefits of each choice and picks the best one.
(C) Financial planning aims at choosing the best investment and financing alternatives by focusing on their costs and benefits. — Incorrect. This is the aim of financial management. Financial planning looks at how much money is needed and when.
(D) The objective of financial planning is to increase the shareholders’ wealth. — Incorrect. Increasing shareholders’ wealth is the objective of financial management. Financial planning aims to have enough funds at the right time.
Financial planning and financial management are different. Planning arranges the funds, while management chooses how to raise and use them.
NCERT (2026-27 Edition): “Financial Planning … 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. Financial planning on the other hand aims at smooth operations by focusing on fund requirements and their availability in the light of financial decisions. …” |