What is the purpose of a financial plan?

The purpose of a financial plan is to outline a business's financial goals and strategies. This involves creating a roadmap for how the business intends to manage its finances, which includes forecasting future revenues and expenses, determining funding needs, and setting financial goals that align with the overall business objectives. A well-structured financial plan provides guidance on how to allocate resources effectively, make informed decisions, and achieve financial stability and growth.

While tracking daily expenses is essential for operational management, it is not the primary focus of a financial plan. Likewise, defining a company's employee structure pertains to organizational management rather than financial strategy, and setting prices for products and services falls under marketing and operations rather than the overarching purpose of a financial plan. Thus, the emphasis on goals and strategies makes the second choice the most relevant to the purpose of a financial plan.