KNOW ABOUT Credits in Finance & What is Financial Planning ?

Credits in Finance

• In finance, credit means to get money as debt. It also means to gets current asset or fixed asset without pay its price immediately. A person or company who gets money will be responsible to repay its principle amount with interest after certain time. In case, if he purchases goods on credit, then there is no need to pay interest on the credit amount. Bonds are issued if company gets credit from public, then company is also responsible to pay interest.

• In credit, a party who gets loan will be debtor of other part and other party will become creditor for the first party who gets cash. If debtor does not pay the amount of credit then it becomes bad debtswhich is the loss of loan providing party. It is very necessary to maintain provision for doubtful debtsfor creating reserve for purchasing stock or paying other expenses if we will receive fund from debtors for given credit in reality.

What is Financial Planning ?

• Financial Planning is combination of two words . First word is financial which has made from finance. It means fund and cash that generates earning . Financial is adjective of noun word finance, every business transaction or event which is relating to fund or money or cash or currency is called financial transaction or financial event . Planning means to do any work with predetermined process and program and factful estimations . Now , Financial planning means all planning which is relating to fund or money . In financial planning , Finance manager makes the plans forGETTING FUND from loan and other sources at very low cost . He also makes plans for effective utilisation of these money in high return projects and purchasing of fixed assets . For this he estimates companies cost of capital , return on investment , companies fixed and variable cost , Companies other fixed and Variable revenue resources , companies work capability . All these plans and estimations are included in Financial planning .