To measure a company’s success is to measure the growth of the company. There are a host of manners in which a company’s growth potential can be assessed.Assessment of Company’s Growth PotentialFollowing methods are the most significant ones to calculate the growth potential of a company −Revenues and EarningsRevenues and earnings that are obtained via sales are good indicators of a company’s growth potential. The money that a company makes via sales is a factor that determines whether the company is strong and if so how much its potential to grow.The money left after paying for all expenditures is the ... Read More

What is Sustainable Growth?The sustainable growth of a company is the growth that it achieves without having to finance its projects externally. In other words, the sustainable growth rate is the maximum rate of growth a company can achieve with its own funds.For example, a company may use retained earnings for furthering its expansion or increasing output. Such growth would not need external support. Such growth in finance is known as sustainable growth.The Sustainable Growth Rate (SGR) of a company shows how well it manages its day-to-day activities, such as paying the bills and getting paid for its goods and ... Read More

What is Sustainable Growth?The main aim of financial planning is to get a balanced relationship between financial goals. It is based on the sustainable growth of a company given its established financial policies. As it is known, financial planning involves growth, investment, and financing. Therefore, to achieve sustainable growth, the firms need to create policies that augment the growth potential of a company to sustain in a long-term period.Sustainable growth is a percentage measure of yearly growth in sales that is in sync with the company’s financial policies meaning no fresh equity is issued.The following relationship may be used to ... Read More

What is a Long-Term Financial Plan?A long-term financial plan is a projection of the business’s doable things to reach the financial goal of the organization. The business, therefore, must create the plan so that it acts as a warning, showing the pitfalls of cash flow dips, pinpointing the best time to execute tasks, and identifying financial needs for the future.A long-term plan is usually longer than a single-year plan as a short-term plan is usually of a year or less, whereas long-term plans have tenures of more than one year. Long-term planning is more static; it may include the facets, ... Read More

Businesses often make short- and long-term goals that are defined by financial plans. Financial plans may be both short- and long-term depending on their tenure. Short-term plans are usually of a year or less while long-term plans have tenures of more than one year.Both short- and long-term plans are inevitable for businesses. The businesses that make short- and long-term goals need to measure their performance by measuring the Key Performance Indicators (KPIs). Keeping track of the KPIs and successfully completing them is the key to success for firms.Here, we define short and long-term financial planning, show their differences and express ... Read More

Both financial forecasting and financial planning can be applied to businesses and individuals, depending on the needs of the companies and the people, respectively. While financial forecast is made on a future date, financial planning is used to reach the goal on the set date in a step-by-step manner.Financial Forecasting vs. Financial PlanningAlthough Financial Forecasting and Financial Planning are related in terms of future endeavours, however, there are stark differences between the two. These differences are as follows −Estimation vs. ForecastingFinancial forecasting is an estimation or a projection, whereas financial planning is a process that should be followed to reach ... Read More

What do you understand by Financial Planning?The financial planning process is a systematic process of planning and forecasting. The finance managers usually take into account various inputs, place them in the modeling, and derive the outputs. Financial planning is an unavoidable process for every firm in order to face stiff competition in the market and grow simultaneously. Without having a proper plan, the company cannot have an ideal vision, and therefore, the management cannot define a subtle growth path.The inputs that are used in the financial planning process act as variables of growth for a company. Modeling acts as a ... Read More

What is Financial Planning?A company’s ultimate objective is to grow its sales and revenues and earn as many profits as possible from the markets. For this, it must have assets, such as equipment and machinery in its possession. The company must incur expenses to buy raw materials in order to produce finished goods from raw materials.There are expenses in marketing the goods and services too. The company may need to sell its products in credit to increase the market share and push the sales up. This will create accounts receivables and debtors. The company may decide to use its retained ... Read More

The ultimate aim of a company is to earn profits and the financial managers play a big role in this by utilizing their skills and knowledge.Some of the major implications of the finance theory which can be summarized as follows −Wealth maximization as the Primary ObjectiveShareholders’ wealth maximization is the primary objective of the management. Shareholders are the owners of a company and they have the primary interest in the prosperity and growth of the company. A company cannot deny the role of shareholders in forming the organization by investing money in the company through shares.Therefore, when a company earns ... Read More

The roles and responsibilities of a financial manager were very limited in the past, about three to four decades back. However, in the modern day, the finance managers not only control the spending and the accounts, but they play a major role in directing the organization’s efforts to synchronize all of the activities of a company.However, depending on the depth of functionalities and their importance, the financial managers perform two main functions −Allocation of funds which is an investment decision.Generation of funds which is a financial decision.These functions are guided by the finance theory which makes two assumptions to let ... Read More