Which of the following best describes the three key components of financial planning?

• A. Budgeting, forecasting, and setting financial goals
• B. Cost allocation, depreciation, and cash reconciliation
• C. Auditing, tax preparation, and inventory management
• D. Revenue recognition, expense matching, and asset valuation

Answer: (A)

Verified step by step guidance

1. Understand the concept of financial planning: Financial planning involves creating a roadmap for managing finances effectively, ensuring resources are allocated efficiently to achieve specific goals.
2. Identify the three key components of financial planning: These typically include budgeting, forecasting, and setting financial goals, as they are essential for planning and managing financial resources.
3. Clarify each component: Budgeting involves creating a plan for income and expenses, forecasting predicts future financial outcomes based on historical data, and setting financial goals establishes targets to achieve financial success.
4. Compare the options provided: Evaluate each option to determine which aligns with the definition and components of financial planning. For example, cost allocation, depreciation, and cash reconciliation are more related to accounting processes rather than planning.
5. Select the correct answer: Based on the analysis, choose the option that best describes the three key components of financial planning, which is 'Budgeting, forecasting, and setting financial goals.'