Sehaj joined his father’s business of Organic masalas, near Baddi in Himachal after completing his MBA. In order to capture a major share of the market, he decided to sell the product in small attractive packages by using the latest packaging technology and machinery. He believed that this project has huge financial potential in terms of sales and cash flows. Father asked Sehaj to prepare a financial blueprint for the organization’s future operations. His father suggested that they hire financial consultants to help them with various sources of funds. The consultant enlisted various sources of finance and their associated costs of public issue to determine the optimal source(s) of finance. The consultant also referred to certain guidelines issued by SEBI.
"Father asked Sehaj to prepare a financial blueprint for the organization's future operations." Identify the financial concept discussed here.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Financial planning
Option (1) Wealth maximisation — Incorrect. This is the objective of financial management: to raise the market price of the equity share. It is not the preparation of a blueprint.
Option (2) Trading on equity — Incorrect. This is the use of fixed-cost debt to raise the return to equity shareholders.
Option (3) Optimum capital structure — Incorrect. This is the mix of debt and equity that raises the value of the equity share the most.
Option (4) Financial planning — Correct. Financial planning is the preparation of a financial blueprint of a firm’s future operations. It estimates how much money will be needed and when, so that funds are available at the right time and are not idle.
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. On the other hand, if excess funds are available, it will unnecessarily add to the cost and may encourage wasteful expenditure. …” |