The long-term And Short-term financial plan

Long-term financial plan

The long-term financial plan

The long-term financial plan that requires a long time to build a business or industry and requires long-term capital investment is called a long-term financial plan. Every business organization has its own style or characteristics of capital investment.

A long-term plan includes details of the amount of fixed assets required by the business, the amount of land, the size of the building, the size of the factory, the amount of machinery, furniture, vehicles, etc., and the amount of capital required to procure and install them. Apart from this, it mentions the forecast of long term capital cost of setting up the industrial plant.

That is why this process is called long-term capital expenditure planning. In the long-term financial plan, it is necessary to mention how the financing will be done, the details of receiving and spending money periodically, the organization's organizational, legal type, size and the amount of financial expenses in this work.

It also contains details of capital receipts from own funds, loans from banks and other sources. Long and medium term loans from banks are the main source of fixed capital. Joint venture companies raise capital by selling common shares and long-term debentures.

Capital is raised by buying ordinary shares, preference shares, debentures, term loans, leases and installments. An idea about these issues can be gained from long-term financial planning. Sources of long-term financial planning are discussed 1. Owners 4 Business owners are the main source of long-term financing. Owners of a sole proprietorship, partners in a partnership, and shareholders in a joint venture raise capital for the business.

Shilpa Bank: Shilpa Bank provides long-term loans to meet the long-term financial needs of business organizations for the industrialization of the country. Insurance companies: The insurance companies of the country provide long-term capital under special conditions. Investment companies: Investment companies raise funds by selling shares and securities to the public, and later use the money to buy shares and securities of various joint ventures and act as a source of long-term financing for these businesses. 2. 3. 81 6. 91 8.

Commercial Banks: Commercial banks currently provide long-term loans. According to the policy adopted by the government and the directives of Bangladesh Bank, commercial banks provide long-term loans to the industrial and housing sectors. Debt Customers: Debt customers guarantee the sale of shares and debentures of a new joint venture. If the issued shares and debentures cannot be sold in the market, they buy the shares and debentures themselves and arrange the long-term financial resources of the company. Promissory note: Promissory note is a document acknowledging the debt of a company. Debentures are second only to shares and stocks as sources of long-term financing. A joint venture can raise long-term debt by issuing debentures. However, interest has to be paid at a fixed rate on the loan. Provident Fund: A part of the profit is deposited in the provident fund every year as per the decision of the general meeting of the joint venture capital business. Such funds act as a long-term source of joint venture capital.



Depreciation Fund 4 Every business or industrial establishment charges depreciation on its fixed assets every year. Funding is created by depreciation. This depreciation fund acts as a source of long-term financing. Specialized Financial Institutions: The role of specialized financial institutions is very important in raising long-term capital in joint ventures.

All these financial institutions can be both domestic and foreign, such as Bangladesh Industrial Credit Corporation, Bangladesh Investment Corporation, Bangladesh Home Construction Lending Corporation, Bangladesh Small and Cottage Industries Corporation etc. International specialized organizations provide long-term financing in Bangladesh, such as World Bank (World Bank), Asian Development Bank (ADB), Islamic Development Agency (IDA), International Finance Corporation (IFC) etc.

short-term financial plan

The short terfinancial plan

The entrepreneur has to formulate a short term financial plan along with the long term financial plan. Effective financial planning in managing the annual, half-yearly, quarterly, monthly, weekly, and even daily activities of the business organization. absolutely necessary It generally refers to the sound management of current assets and liabilities. In this case, the entrepreneur considers the possible working capital structure of his organization as a major consideration in formulating his short-term annual plan. Capital structure refers to cash funds, various inventories, accounts payable to customers, short-term liabilities, etc. Sources of short-term finance: 31. Trade credit: Trade credit is a type of credit facility through which the seller of the goods sells the goods to the buyer after a specified period of time. Provides payment facilities. Business loans are an important source of short-term financing. Commercial Banks: Commercial banks are one of the sources of short term loans.
Commercial banks provide short-term loans to businessmen in the form of cash loans and deposits. That is why they charge fixed rate of interest. At the end of the term, the businessmen have to repay the loan.

3. Financing companies: In every country, some special types of financial institutions are established, which are known as financing companies. Such institutions provide short-term loans to businessmen.

4. Buyers: Many times buyers act as a source of short-term financing by making advance payments for products. In order to get the products that are in high demand in the market, the buyers pay in advance before the goods are delivered.

5. Faria or Dalal: Faria or Dalal acts as a source of short-term finance by providing advance payments to traders. Fariyas give advance loans to the traders to get the products which are in high demand in the market. For example, the application of financing can be seen in jute, shrimp and hilsa fish business.

6. Grameen Bank: This bank provides short-term loans to businessmen in the rural areas of Bangladesh. No collateral is required for borrowing from this bank.

7. Commercial paper houses: These types of specialized financial institutions provide short-term loans to businessmen by collecting money through the purchase and sale of certificates. Co-operative credit societies: Co-operative credit societies also provide short-term loans to business enterprises. However, the business organization has to take this loan by mortgaging its own land.

9. Foreign Exchange Bank: This type of bank generally provides short-term loans to large institutions, but provides short-term financing at a higher rate for foreign trade needs.

10. NGO: At present, various NGO organizations provide short-term loans to small scale industries such as poultry farms, fisheries, livestock farms, etc. in the rural areas of Bangladesh.

11. Directorate of Youth Development: Directorate of Youth Development provides short-term loans for the purpose of eliminating unemployment and self-employment. This department gives short-term loans only to those who receive training from the youth development center. Finally it can be said that short term capital requirement is totally dependent on the activities of the organization. Therefore, the entrepreneur usually prepares the financial forecast of his organization while formulating a short-term financial plan. Financial forecasting refers to the reflection of the financial statements of an organization's future activities.