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Essay / Research Paper Abstract
A 5 page paper listing 12 questions that a company should ask before creating a finance plan. Questions include how much liquidity the firm needs; how much time the plan will include; whether short-term debt is financing long-term projects; and other items. Not all of these questions can apply to every company, of course. Whether the company is a large multinational or has only one employee, there are size- and industry-specific questions that financial managers must address in order to produce an effective financial plan. Bibliography lists 5 sources.
Page Count:
5 pages (~225 words per page)
File: CC6_KSfinPlanQu.rtf
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Unformatted sample text from the term paper:
several questions that organizations need to ask prior to preparing a finance plan. Some of these questions are industry-specific, others depend on the state of the economy at the
time that the finance plan is written and on economic forecasts for the length of time that the plan is in effect. Questions
How much time should the plan cover? Should the financial plan extend three years? Five? The optimum amount of time that the plan will cover will depend
in large part on the industry in which the organization operates. As example, health care is changing so rapidly that a five year plan likely will be outdated before
the end of the third year. A retailer seeking to expand, however, does not face such rapid changes and probably would be better off with a five year plan.
How much liquidity does the firm need? Should it hold large cash reserves, or at least as large as it can manage?
Mikkelson and Partch (2003) report that "Conservative financial policies are often criticized as serving the interests of managers rather than the interests of stockholders" (p. 275). They evaluated
the performance of firms holding "more than one-fourth of their assets in cash and cash equivalents" (Mikkelson and Partch, 2003; p. 275) for five years to find that the common
complaint is not a valid one. High "cash holdings are accompanied by greater investment, particularly R&D expenditures, and by greater growth in assets" (Mikkelson and Partch, 2003; p. 275).
Ford spent several years building huge cash reserves in anticipation of the decline in the popularity of their trucks in light of their
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