Generally, firms that are subject to high degree of____________ , relatively short production cycles, orboth tend to use shorter planning horizons.
A) profitability
B) operating uncertainty
C) financial certainty
D) financial planning

Question

Quizplus · Accepted Answer

Firms that face high operating uncertainty, such as those with volatile demand or variable input costs, may find it difficult to accurately forecast future demand and costs beyond a short period of time. Similarly, firms with short production cycles may only need to plan a few weeks or months ahead in order to meet customer demand and avoid excess inventory. Therefore, these types of firms tend to use shorter planning horizons. Option A is incorrect because profitability alone does not necessarily determine planning horizons. Option C is incorrect because financial certainty may lead to longer planning horizons, as the firm has a clearer understanding of its financial position. Option D is also incorrect because financial planning refers to the process of setting financial goals and developing strategies to achieve them, rather than the length of the planning horizon.

Generally, Firms That Are Subject to High Degree Of____________