Long-range Profit Planning and Other Long-range Objectives

Long-range profit planning and other long-range objectives

We have discussed long-range planning almost exclusively in terms of long-range profit planning and its financial implications. This is because it is one of the most important company objectives, and one of special interest to accountants. It should not be forgotten, however, that long-range planning requires that careful attention should similarly be given to the attainment of other objectives of great importance to the company, for example, those relating to employees, consumers and the local community. Unless a firm gives attention to developing realistic objectives in these other areas the firm will find its ability to make profits very restricted.

It is evident from the nature of the accountant's skills, and the range of activities in which he may be involved, that he has a central role to play in long-range planning. The result of his involvement in long-range planning is to bring him into contact with functions beyond his direct control such as marketing, research and development and production to a much greater extent than is possible in short-term planning.

Next - the Realization Convention

Read on: The Long-range Financial Plan

Long-range financial planning is concerned with ensuring the continuing soundness of the financial structure of the firm, maintaining adequate working capital, and providing additional capital for expansion from earnings, borrowings or by the issue of new shares.

The essential components of the long-range financial plan are a projected income statement, a projected cash flow statement, a capital expenditure forecast, a financing plan and a projection of the capital structure. We shall briefly examine each of these components of the financial plan.

(a) The projected income statementThe Long-range Financial Plan