Strategic Financial Planning Flashcards

A strategic plan must balance growth ambitions with available financing. The 'sustainable growth rate' indicates:

Answer: The maximum growth fundable without new equity

The sustainable growth rate is the maximum growth a firm can finance from retained earnings without issuing new equity.

Which element is essential for translating strategy into measurable financial targets?

Answer: Key performance indicators (KPIs)

KPIs convert strategic objectives into measurable financial and operational targets.

A balanced scorecard integrates financial measures with which additional perspectives?

Answer: Customer, internal process, and learning/growth

The balanced scorecard combines financial results with customer, internal process, and learning/growth perspectives.

In strategic planning, contingency planning primarily serves to:

Answer: Prepare responses to adverse events

Contingency planning establishes predefined responses to adverse or unexpected events.

A firm evaluating long-term debt capacity should focus most on its ability to:

Answer: Service debt through future cash flows

Debt capacity depends on the firm's ability to generate cash flows sufficient to service the debt.

Which discount rate adjustment is appropriate when a strategic project is riskier than the firm's average operations?

Answer: Use a higher, risk-adjusted discount rate

Riskier projects warrant a higher, risk-adjusted discount rate to reflect their greater uncertainty.

The final step that closes the strategic financial planning loop is:

Answer: Monitoring results and feeding them back into the plan

Monitoring actual results and feeding insights back into the plan creates a continuous improvement loop.