Final answer:
Financial managers ask questions such as whether the plan sets the firm up for success in the future, if more cash or marketable securities are needed for risk protection, and if the plan yields appropriate current and quick ratios.
Step-by-step explanation:
Financial managers ask several questions when determining the appropriate short-term financial plan for their firm. These questions help them make informed decisions to ensure the financial stability and success of the company:
- Does the plan set the firm up for success for the following year in addition to the current year? Financial managers need to consider the long-term implications of their short-term financial plan. They must assess whether the plan aligns with the company's goals and objectives and supports its growth and profitability.
- Does the firm need more cash on hand or marketable securities to protect against risks such as customers stretching their payables? Financial managers evaluate the firm's liquidity needs and assess potential risks and uncertainties. They determine whether additional cash or marketable securities are necessary to handle unforeseen circumstances or manage customer payment delays.
- Does the plan yield appropriate current and quick ratios? Financial managers analyze the firm's current and quick ratios, which measure its ability to cover short-term obligations. They ensure that the short-term financial plan maintains healthy liquidity ratios, indicating the company's ability to meet its current liabilities.