Final answer:
To determine the achievement of a short-term financial goal of earning projected operating income, a company should compare actual operating income to the master budget operating income for the period. This comparison helps to identify variances and informs strategic decisions for operational improvement and financial planning.
Step-by-step explanation:
To compare the actual operating income for the period to the master budget operating income for the period. This comparison allows a company to measure the extent to which its short-term financial goal of earning projected operating income has been achieved, highlighting variances and areas for operational improvement.
By setting a master budget, the company outlines its expected revenue, expenses, and operating income, providing a roadmap and benchmarks for financial performance. Comparing actual performance against the master budget can help to identify whether a company is on track or if deviations have occurred. Viable adjustments and strategic decisions can then be formulated based on this comparison, contributing to the company's ability to manage resources efficiently and work towards long-term profitability.
When it comes to profits as a source of financial capital, a company's ability to generate and sustain profits is crucial. Profits allow a company to reinvest in itself and secure financial capital through other avenues such as borrowing from banks or issuing bonds. Maintaining a strategic outlook through budgeting and profit analysis ensures a company's growth and financial sustainability.