Financial plan


Financial plan

In general usage, a financial plan can be a budget, a plan for spending and saving future income. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan can also be an investment plan, which allocates savings to various assets or projects expected to produce future income, such as a new business or product line, shares in an existing business, or real estate.

In business, a financial plan can refer to the three primary financial statements (balance sheet, income statement, and cash flow statement) created within a business plan. Financial forecast or financial plan can also refer to an annual projection of income and expenses for a company, division or department. [Meigs, Walter B. and Robert F. "Financial Accounting", 4th ed. (McGraw-Hill Book Company, 1970) pp. 187-188.] A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company. ["Barron's Finance", 4th ed, 2000, p.578.]

While a financial plan refers to estimating future income, expenses and assets, a financing plan or finance plan usually refers to the means by which cash will be acquired to cover future expenses, for instance through earning, borrowing or using saved cash.

References

ee also

*Capital budgeting
*Financial planning (business)
*Optimism bias
*Personal budget
*Reference class forecasting


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