Essential Financial Planning: Liquidity, Profit, and Assets
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1. Components of the Financial Plan
The Financial Plan consists of three essential parts:
Cash Plan (Liquidity Management)
The objective is to anticipate if the company will need money in any given month and plan how to obtain it. This plan addresses the company's liquidity and short-term financial viability.
Income Statement (Profit and Loss)
Used to determine if the company is generating profits or incurring losses.
Balance Sheet
Provides information regarding the company's assets (what the company owns), liabilities (what the company owes), and equity (what the company should have).
Overall, the Financial Plan assesses both economic viability (profitability) and financial viability (solvency/liquidity).