Financial Plan Assignment

Question :

How useful do you think a financial plan is, considering that it is based on future assumptions that usually will not be 100% correct?

How valuable is it for the entrepreneur to evaluate and monitor financial plans monthly rather than waiting for quarterly reports?

In addition to your main response, you must also post substantive responses to at least two of your classmates' or instructor’s posts in this thread. Your response should include elements such as follow-up questions, further exploration of topics from the initial post, or requests for further clarification or explanation on some points made by your classmates.

Providing evidence or information from external sources in your posts will strengthen the points you are making and improve your overall score on the weekly Discussion Board activity.

Answer :

The usefulness of a financial plan

A financial plan includes estimated profit and loss statement and cash flow statement of the business for the next 3 to 5 years. Sometimes, a balance sheet is also included in the financial plan. Thus, it helps the business to understand the financial capacity of the business and its potential to cover the cost of the business (da Silva Nogueira and Jorge, 2017). The financial plan is also important because, with the help of it, the business can establish a financial goal of the business and can develop strategies to achieve the goal. The financial plan also determines the feasibility of the business and tells the entrepreneur whether the business will be successful or not. The financial plan makes it clear that whether the resources are accessible or out of reach that can determine the success of the business. The financial plan is also useful for variance analysis because with the help of it the business can analyze its marketing plan and its potential to generate estimated revenue. The financial plan is also useful for forecasting and identifying financial requirements as well as obtaining funds for the business.

Monitoring financial plan monthly

The market is very volatile and changes are made frequently in the market and hence it is important to monitor the financial plan of the business so that the entrepreneur can make changes in the financial plan from time to time (Ghazali et al., 2018). If the entrepreneur will wait for the quarterly report, it cannot cope with the changes and hence may suffer loss. So, to avoid loss, it should be monitored and evaluated monthly rather than waiting for the quarterly report.

References

da Silva Nogueira, S. P., & Jorge, S. M. F. (2017). The perceived usefulness of financial information for decision making in Portuguese municipalities. Journal of Applied Accounting Research.

Ghazali, A. W., Suffian, M. T. M., Sanusi, Z. M., & Alsudairi, F. S. (2018). Managerial Opportunism: Monitoring Financial Risk of Malaysian Shariah-compliant Companies. GLOBAL JOURNAL AL-THAQAFAH, 99-115.