Final answer:
Strategic planning is the process where managers evaluate a firm's potential and devise strategies for achieving long-term goals. It involves spending on assets or projects with expectations of future profits and raising financial capital through various sources including outside investors.
Step-by-step explanation:
The process by which a firm's managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives is called strategic planning. This involves rigorous analysis of the firm's current situation and the market environment to formulate a roadmap for success. Firms execute strategic planning by considering possible actions that involve spending money presently with the expectation of future profits, for instance purchasing long-term assets or investing in research and development.
Firms can acquire the financial capital necessary to fund these ventures in various ways, such as from early-stage investors, by reinvesting profits, borrowing through banks or issuing bonds, and by selling stock. The shift from requiring personal familiarity with managers to relying on public financial information allows a firm to attract investment from outside investors like bondholders and shareholders without personal connections to the business managers.