Question

Why is it important to set financial objectives? Multiple Choice

A.To overtake key competitors on such important measures as net profit margins and return on investment.
B.Without adequate profitability and financial strength, the company's ultimate survival is jeopardized.
C.To convince shareholders that top management is acting in their interests.
D.To translate the company's business model into action items.
E.To indicate to employees that financial objectives always take precedence over strategic objectives.

Answer 1

Setting financial objectives is crucial as it measures a company's ability to survive by maintaining profitability, it instills confidence in investors, and translates the business model into actionable strategies.

Step-by-step explanation:

Setting financial objectives is important for several reasons. Firstly, they serve as a measure of a company's success and sustainability since profits determine whether a business can continue operating. Without adequate profitability and financial strength, the company's ultimate survival is jeopardized. Secondly, it is essential for established firms to give confidence to outside investors, such as bondholders and shareholders, by demonstrating a strategy likely to lead to profits. This makes the process of obtaining financial capital more feasible. Lastly, financial objectives help in translating a company's business model into specific action items that are required for execution.