Top 23 Financial Planning Interview Questions You Must Prepare 14.Jun.2024

Financial analysis uses the output from financial planning to assess profitability, liquidity, solvency, and stability for organizations. It also involves the use of benchmarks and comparisons to similar organizations to help companies make decisions about business strategies.

The Importance of Having a Financial Plan. Creating a financial plan helps you see the big picture and set long and short-term life goals, a crucial step in mapping out your financial future. When you have a financial plan, it's easier to make financial decisions and stay on track to meet your goals.

There are following steps to the financial planning process:

  • Establishing and defining the client-planner relationship.
  • Gathering client data including goals.
  • Analyzing and evaluating the client's current financial status.
  • Developing and presenting recommendations and/or alternatives.
  • Implementing the recommendations.

A Will is a legal document in which a person gives instruction about the distribution of his/her assets and who will become the legal guardian for his/her minor. A Will is your final wish. So always update it. It is always advisable to register your will. 

Personal finance is the financial management which an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life events.

The Financial Planner first makes a note of your financial goals and its priorities. Then the planner analyses your current financial situation, recommends the right plan with proper asset allocation, monitoring it regularly, rebalance your portfolio from time to time based on your changing life style and investment opportunities. 

Net Worth is an overall statement of your assets and liabilities.

Net Worth = Asset – Liabilities.

A financial planner is a qualified investment professional who helps individuals and corporations meet their long-term financial objectives by analyzing the client's status and setting a program to achieve that client's goals.

Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives. Usually, a company creates a Financial Plan immediately after the vision and objectives have been set.

There are only 3 major components in the Financial Planning process:

  1. Current Resources (CR).
  2. Investment Options (IO).
  3. Financial Goals (FG).

Financial Planning: CR + IO = FG.

Budgeting In financial planning: budgeting plays a very vital and important part. Budgeting will give you the exact picture of your expenses and spending habits. This will help you to plan your expenses and spending habits more efficiently. If you do not know where you are spending your money just keep a track on your spending habits on a monthly basis. This sounds ridiculous, but believe us, this will definitely help you to reduce your unnecessary spending.

Financial Planning is the process of estimating the capital required and determining it’s competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.

Importance of Cash Flow Statement and Net Worth in Financial Planning : Both the Cash Flow and Net worth Statements will give you a real picture of your present situation and help you make realistic financial goals. Update it regularly. These two vital documents do not replace each other; but they are supportive documents to each other.  

It’s the ultimate art and science of wealth creation. Rebalancing is the periodic adjustment of your portfolio to protect your current gain with effective risk management to achieve your financial goal.

Importance of Financial Planning :

Financial Planning is process of framing objectives, policies, procedures, programmes and budgets regarding the financial activities of a concern. This ensures effective and adequate financial and investment policies. The importance can be outlined as-

  • Adequate funds have to be ensured.
  • Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
  • Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.
  • Financial Planning helps in making growth and expion programmes which helps in long-run survival of the company.
  • Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds.
  • Financial Planning helps in reducing the uncertainties which can be a hindrance to growth of the company. This helps in ensuring stability an d profitability in concern.

The market may move up and down in different situations, which is quite natural. The main reason for rebalancing is to protect the current equity valuation when the market rise and buy equity when the market fall based on the market conditions. If you apply this strategy, you might achieve your goal before the actual time. Rebalancing your portfolio on a regular basis maintains the desired return in your investment strategy - it is one of the important key for effective risk management.

Objectives of Financial Planning : Financial Planning has got many objectives to look forward to

Determining capital requirements- This will depend upon factors like cost of current and fixed assets, promotional expenses and long- range planning. Capital requirements have to be looked with both aspects: short- term and long- term requirements.

Determining capital structure- The capital structure is the composition of capital, i.e., the relative kind and proportion of capital required in the business. This includes decisions of debt- equity ratio- both short-term and long- term.

Framing financial policies with regards to cash control, lending, borrowings, etc.

A finance manager ensures that the scarce financial resources are maximally utilized in the best possible manner at least cost in order to get maximum returns on investment.

Important Parties in a Will :

The Executor :  This is the person who is responsible to execute your wishes, look after your taxes and execute your will as per your wishes. 

The Beneficiary : The Beneficiary is the receiver of your assets. You may have many receivers in your will. It is advisable that even if you have a small asset update it annually or whenever your situation changes. Otherwise it can cause family disputes. A Will can reduce the chances of any disputes significantly.

Power of Attorney :   Power of Attorney is the right which you give to someone to act on your behalf. There are two types of power of attorney. 

Power of Attorney for Personal Care :  This is the right which you give to someone to make decisions regarding your health on your behalf when you are unable to do it.

Power of Attorney for Financial Matters :  You are giving the right to someone when you are unable to make financial decisions.

Strategic Financial Planning Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives. Usually, a company creates a financial plan immediately after the vision and objectives have been set.

Financial Planning is an ongoing process to help you make sensible decisions about money that can help you achieve your goals in life; it's not just about buying products like a pension or an ISA.

The financial planning process consists of the following six steps: Establish and define the client-planner relationship. The financial planner should clearly explain and document the services that he or she will provide to you and define both his/her and your responsibilities during the financial planning engagement.

Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives. Usually, a company creates a Financial Plan immediately after the vision and objectives have been set.

The major purpose and reason for financial planning is to line up our financial and lifestyle ducks. Most people have a lot going on financially and with life in general, RRSP's, TSFA's, life insurance, pension pl, education funds, taxes, employee benefits, wills, power of attorney's, cash flow to mention a few.