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Why financial planning is important to improve the financial performance of the company

ABC Construction LLC is a construction company owned by Mr. Mohammad (a civil engineer by profession). Mr. Mohammad established the company seven years ago in Dubai. Now it has branches in other Emirates. The company is doing well in terms of business but Mr. Mohammad is not satisfied with the financial matters of the company as there is always a shortage of funds.

Consequently the company is sometimes unable to pay remuneration to the workers and make payments to creditors and suppliers. The company is losing its name in the credit market and the workers are unhappy due to the non-payment of their wages.

Mr. Mohammad wants to resolve this matter. He asked you to help him in the following issues:
- Explain to Mr. Mohammad why financial planning is important to improve the financial performance of the company.

Solution Preview

I would explain to Mr. Mohammad that financial planing is such an important role to his business that if he continues to take it for granted, there may be no business left for several reasons.

First, talented employees are hard to find. A good employee who is capable of finding employment elsewhere will not tolerate not being paid regularly. If Mr. Mohammad ignores the planning too long, his key employees and managers may leave to work for a competitor or to start their own company. Also, as word spreads about his ...

Solution Summary

The importance to improve the financial performances of the company are determined.