Identify the point, which is not an an importance of Financial Planning?

It calculates mix between owners and borrowed funds

The correct answer is Option (4) - It calculates mix between owners and borrowed funds

* CAPITAL STRUCTURE IS THE MIX BETWEEN OWNERS AND BORROWED FUNDS. One of the important decisions under financial management relates to the financing pattern or the proportion of the use of different sources in raising funds. On the basis of ownership, the sources of business finance can be broadly classified into two categories viz., ‘owners funds’ and ‘borrowed funds’. Capital structure refers to the mix between owners and borrowed funds.

The importance of financial planning can be explained as follows:

(i) It helps in forecasting what may happen in future under different business situations. By doing so, it helps the firms to face the eventual situation in a better way. In other words, it makes the firm better prepared to face the future.

(ii) It helps in avoiding business shocks and surprises and helps the company in preparing for the future.

(iii) If helps in co-ordinating various business functions, e.g., sales and production functions, by providing clear policies and procedures.

iv) Detailed plans of action prepared under financial planning reduce waste, duplication of efforts, and gaps in planning.

(v) It tries to link the present with the future.

(vi) It provides a link between investment and financing decisions on a continuous basis.

(vii) By spelling out detailed objectives for various business segments, it makes the evaluation of actual performance easier.