Financial Planning Terms
In general usage, a financial plan can
be a budget, a plan for spending and saving future income. This plan
allocates future income to various types of expenses, such as rent
or utilities, and also reserves some income for short-term and
long-term savings. A financial plan can also be an investment plan,
which allocates savings to various assets or projects expected to
produce future income, such as a new business or product line,
shares in an existing business, or real estate.
In business, a financial plan can refer to the three primary
financial statements (balance sheet, income statement, and cash flow
statement) created within a business plan. Financial forecast or
financial plan can also refer to an annual projection of income and
expenses for a company, division or department. A financial plan can
also be an estimation of cash needs and a decision on how to raise
the cash, such as through borrowing or issuing additional shares in
a company.
While a financial plan refers to estimating future income, expenses
and assets, a financing plan or finance plan usually refers to the
means by which cash will be acquired to cover future expenses, for
instance through earning, borrowing or using saved cash.