Principles of Managerial Finance, 15th Edition

4.1 The Financial Planning Process

1. LG1

Financial planning is an important aspect of the firm’s operations because it provides road maps for guiding, coordinating, and controlling actions to achieve the firm’s objective of creating value for shareholders. The financial planning process is highly collaborative across functions because the inputs required to build a financial plan come from every part of the firm. Two key aspects of the financial planning process are cash planning and profit planning. Cash planning involves preparation of the firm’s cash budget, a tool that managers use to ensure they put excess cash to work or have outside financing lined up when the firm is not generating enough internal cash to cover expenses. Profit planning ...