Financial Obligation and Business Planning

In a medium and large organisation, Business planning is part of the annual planning process. It is conducted normally on a yearly basis in time for a new year financial budget. In an uncertainty economic situation, the business environment is much affected. Therefore organisation perform their annual financial budget to ascertain the financial performance for the year, it also need to review relevance of the financial budget set previously.

For a public listed companies, it is the obligation of the directors to ensure the financial projection is meet in accordance to the financial projection which is published to the public and the shareholders. The directors is responsible to accountable for the financial report.

Sometimes, the financial obligation is termed as company objectives usually look at financial indicators such as Profit, Return of Shareholder Fund, Cash Flow, Market Capital, Assets, and Reserves etc. All these are high level financial indicators which give an indication of the health of the company. Legally, all these indicators are reported in an audited Profit & Loss and Balanced Sheet Report.

At the operating level, the executive team is empowered to carry out the business in line with the financial budget. For this purpose, an annual Business Planning is conducted. The focus of this planning is to achieve the financial obligation to the public and the shareholders. Since the financial obligation is projected for a duration of 3 – 5 years, there is not much opportunity to made drastic amendment in the event of economic uncertainty. As such, the drivers to this financial obligation falls on the quality of the business planning.

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