Long-term Financial Planning

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Question 1

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A planning horizon refers to the amount of time necessary to develop the financial plan.

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Question 2

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A common,long-term corporate financial planning horizon would stretch for at least 15 to 20 years.

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Question 3

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Financial plans will rarely succeed unless the forecasts are perfect.

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Question 4

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Financial planning focuses on the big picture.

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Question 5

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Financial planning may incorporate scenario analysis as part of the planning process.

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Question 6

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The primary aim of financial planning is to obtain better forecasts of future cash flows and earnings.

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Question 7

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Financial planning is concerned with possible surprises as well as the most likely outcomes.

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Question 8

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Financial planning should attempt to minimize risk.

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Question 9

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Financial planning is necessary because financing and investment decisions interact and should not be made independently.

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Question 10

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A typical horizon for long-term planning is 5 years.

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Question 11

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Individual capital investment projects are not considered in a financial plan unless they are very large.

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Question 12

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Financial planning requires careful and consistent forecasting.

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Question 13

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Financial planning models must include as much detail as possible.

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Question 14

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The sustainable growth rate is the rate at which the firm can grow without changing its leverage ratio.

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Question 15

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Financial planning just means formulating the company's response to the most likely events.

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Question 16

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Adaptability is not a desirable feature in financial plans.

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Question 17

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Pro formas are projected or forecasted financial statements.

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Question 18

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Percentage of sales models are planning models in which the sales forecasts are the driving variables and most other variables are proportional to sales.

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Question 19

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The balancing items in a financial planning model are variables that adjust to maintain the consistency of the model.They are also known as plugs.

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Question 20

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Debt can be used as a plug item in financial planning.

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