ACCA Advanced Financial Management (AFM) Practice Exam

What does the financial plan within a business plan detail?

1. Projected sales only

2. Cost management strategies

3. Funding requirements and revenue projections

4. Profit-sharing arrangements

The correct answer is: Funding requirements and revenue projections

The financial plan within a business plan is crucial as it provides a comprehensive overview of the business's expected financial performance. It typically includes funding requirements, which outline how much capital is needed to start and operate the business, as well as revenue projections that estimate future income from sales over a specified period. This aspect is vital for potential investors and stakeholders who want to understand the financial viability and growth potential of the business. This financial plan serves as a roadmap for managing resources and ensuring that the business can meet its obligations while also planning for future expansion. It includes detailed assumptions behind the revenue forecasts, such as pricing strategies, target markets, and anticipated sales growth rates, all grounded in market research and analysis. While projected sales and cost management strategies are important components of a business's financial health, they do not encompass the full scope of the financial plan like funding requirements and revenue projections do. Similarly, profit-sharing arrangements are generally specific to partnerships or equity structures and do not address the broader financial planning necessary for business sustainability and growth.