Financial planning formulates the method by which financial goals are to be achieved. It has two dimensions: a time frame and a level of aggregation. A financial plan is a statement of what is to be done in a future time. Most decisions have long lead times, which means they take a long time to implement. In an uncertain world, this requires that decisions be made far in advance of their implementation. Initially, you can focus your attention on financial planning over the long run, which is usually taken to be a two-year to five-year period of time.
Financial plans are complied from the capital-budgeting analyses of each of a firm’s projects. In effect, the smaller investment proposals of each operational unit are added up and treated as a big project. This process is called aggregation.
