Financial Management: Principles and Applications, 13/e

17.3 Developing a Short-Term Financial Plan

There are two basic differences between the short- and long-term operating financial plans. The first is the planning horizon. The short-term plan extends out to one year, whereas the long-term plan goes out three to five years. The second difference relates to the format used to compile and present the two plans. The short-term financial plan is typically presented in the form of a cash budget that contains a great deal of detail concerning the firm’s cash receipts and disbursements. The long-term operating financial plan is typically prepared using pro forma income statements and balance sheets, as we have just demonstrated.

Cash Budget Example: Melco Furniture, Inc.

The cash budget represents a detailed ...