Financial Planning. True or false? Explain.
a. Financial planning should attempt to minimize risk.
b. The primary aim of financial planning is to obtain better forecasts of future cash flows and earnings.
c. Financial planning is necessary because financing and investment decisions interact and should not be made independently.
d. Firms' planning horizons rarely exceed 3 years.
e. Individual capital investment projects are not considered in a financial plan unless they are very large.
f. Financial planning requires accurate and consistent forecasting.
g. Financial planning models should include as much detail as possible.
a. Financial planning should attempt to minimize risk. True. The main aim of financial planning is to maximize the wealth of the stockholders by increasing profit. The profit can be maximized by reduction of risk associated with the project. If the risk is more, it will result in decrease in profit. Therefore, the financial planning should attempt to minimize the risk.
b. The primary aim of financial planning is to obtain better forecasts of future cash flows and earnings. True. The aim of the financial planning is to find out the viability of the project or the profitability of the project. Profitability can be found out by forecasting the earnings and the cash flows from the project. Therefore, the primary aim of the ...
The answer contains true or false answers for seven questions with respect to financial planning along with detailed explanations for the answers.