Financial Management: Principles and Applications, 13/e

17.1 An Overview of Financial Planning

In this chapter, we survey the financial planning process. A firm’s financial plan is generally divided into two components: a short-term financial plan, which spans from several months up to one year, and a long-term financial plan, which spans up to five years. The primary objective of both short- and long-range financial planning is the estimation of the firm’s future financing needs. Having some idea about what the firm’s financing requirements will be before the need arises allows the firm’s management to seek out financing with the most advantageous terms possible. However, there is another reason to engage in financial planning: Simply engaging in the financial planning process forces managers to ...