THE NECESSITY OF FINANCIAL PLANNING

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Учебник: Агабекян И.П.

А23 Английский язык для менеджеров/ И.П. Агабекян, —- Mосква: «Проспект», 2019 — 352 с (Высшее образование).

 

TEXT 2. THE NECESSITY OF FINANCIAL PLANNING

EIGHT OF TEN NEW BUSINESSES FAIL PRIMARILY BECAUSE OF THE LACK
OF GOOD FINANCIAL PLANNING

Financial planning affects how and on what terms you will be able to attract the funding required to establish, maintain, and expand your business. Financial planning determines the raw materials you can af­ford to buy, the products you will be able to produce, and whether or not you will be able to market them efficiently. It affects the human and physical resources you will be able to acquire to operate your business. It will be a major determinant of whether or not your hard work will be profitable.

Tools of Financial Planning

The tools required to prepare a financial plan for business's devel­opment, include the following:

■   Basic Financial Statements - the Balance Sheet and Statement of Income

■   Ratio Analysis - a means by which individual business per­formance is compared to similar businesses in the same cate­gory

■   The Statement of Income - a method used to forecast future profitability

■   Break-Even Analysis - a method allowing the small business person to calculate the sales level at which a business recovers all its costs or expenses

■   The Cash Flow Statement - also known as the Budget identifies the flow of cash into and out of the business

■   Pricing formulas and policies - used to calculate profitable sell­ing prices for products and services

■   Types and sources of capital available to finance business opera­tions

■   Short- and long-term planning considerations necessary to max­imize profits

The business owner/manager who understands these concepts and uses them effectively to control the progress of the business is practic­ing sound financial management thereby increasing the probability of success.

Assignment. Answer the questions:

1.     What are the problems that financial planning helps to solve?

2.      What are the tools of financial planning? Describe them in brief.