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The Controller's Function: The Work of the Managerial Accountant, 4th Edition by Steven M. Bragg

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Chapter 4

Long-Range Financial Plan

Chapter 3 provided an overview of strategic planning. In this chapter, the strategic plan becomes more specific through numerical examples as the next topics, which are segments of the long-range plan, are examined:

  • Trend of revenues and profits
  • Capital investments
  • Cash flows and financing requirements
  • Key statistics
  • Risk analysis
  • Breakdown by business unit/product line/geography
  • Financial position

Layout and Purpose

The elements of the business plan that were described in Chapter 3 did not address the means by which the plan could be achieved. Targets were set, but there was no discussion of how the company would get from its current situation to the new targets. The long-range plan shows anticipated growth rates from the present to the targets, as well as the capital expenditures and capital requirements needed. The plan is backed up by a set of key statistics that indicate changes in such areas as coverage of loan covenants and liquidity.

The long-range plan also includes an in-depth risk analysis. The risk of significant revenue and profit changes are listed, along with probabilities of the changes occurring. From this analysis it is possible to infer the risk of the corporation's not meeting its goals and to gain a general idea of the risk of financial loss that the company is willing to undertake to achieve its goals.

Finally, the plan should include subsidiary plans that categorize projected sales and profits by strategic business units, ...

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