Financial Management and Short-Term Planning

Owning a business is a good feeling to keep to you and especially if it is one that you have invested a lot of sacrifices and patiently waited for. Considering all the struggles you have come through to finally get it home, it is a thing to cherish and that you are not ready to lose any time. That been said, having a business is one thing and maintaining it is another. It is actually not as easy to run a business as it sounds. Studies relate poor financial management and business planning to be the main cause of most business failures.

Having a strategy that focuses on all factors affecting a business is perhaps the only way to reaching success in any business or an investment decision. Since the future is uncertain, it's of even greater importance to diversify your investment options into two prime accounts. You can't risk putting all your money in one pool. Even though you might have assessed your alternate investment options and identified the most appealing you, still can't tell its future. On that regard, you may want to make a long-term asset investment, but also consider having an intermediary short-term investment.

Financial planning is the process of setting and determining capital requirement, capital structure, and financial frame policy to enable maximum return at least cost. When it comes to an investment decision, it is of great consideration to assess which option gives you the most returns within the friendliest time frame and with less risk.

On the investment option of long-term investment or capital budgeting, the investor ought to carefully select a long-term asset or investment whether existing or new. In a long-term investment, you only expect returns in the future and therefore you stand a risk of uncertainty. It is overwhelming to anticipate the valuables that will affect your business in the next two years living alone the future, but again it depends on how you manage and control your business. This again comes down to how you organize your financial planning. To determine the success or performance of the investment in the long run, a minimum rate of return is to be set.

The alternative type of investment is the short-term or working capital management. The investment is founded on current or short termed assets, those that are highly liquid in nature. It is an important investment for any investor as a backup short-term survival option for a long-term project. It ensures that the investor has adequate working capital by maintaining its profitability and also liquidity of the short-term investment. Otherwise, the firm could go bankrupt.

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