Which of the following statements about financial planning is NOT correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Financial planning covers the long-term financial plan called budget.
Option (1) If adequate funds are not available, the firm will not be able to honour its commitments and carry out its plans. — True. This is why financial planning matters. Without adequate funds, the firm cannot honour its commitments or carry out its plans.
Option (2) Financial planning covers the long-term financial plan called budget. — False. The budget is the short-term financial plan. Long-term planning relates to long-term growth and investment, and it focuses on capital expenditure programmes.
Option (3) Financial planning includes both short-term as well as long-term planning. — True. It has a short-term part, the budget, and a long-term part on growth and investment.
Option (4) Financial planning seeks a proper matching of funds requirements and their availability. — True. Financial planning estimates how much money is needed and when, and names its sources. In this way it matches the need for funds with their availability.
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. If adequate funds are not available the firm will not be able to honour its commitments and carry out its plans. …” “Financial Planning … Thus, 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. It focuses on capital expenditure programmes. Short-term planning covers short-term financial plan called budget. …” |