Simulating the strategic financial planning process

Strategic financial planning should (1) involve the key variables in the corporate growth process, (2) reflect the dynamic interaction in the system and (3) incorporate the dimension of uncertainty. Decision makers need a stochastic model that links the interaction between the investment and financi...

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Bibliographic Details
Published in:European journal of operational research 1979-01, Vol.3 (6), p.441-449
Main Author: Gentry, James A.
Format: Article
Language:English
Subjects:
Corporate growth
Decision making
Earnings per share
Financial management
Financial planning
Planning
Return on investment
Strategic
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Summary:Strategic financial planning should (1) involve the key variables in the corporate growth process, (2) reflect the dynamic interaction in the system and (3) incorporate the dimension of uncertainty. Decision makers need a stochastic model that links the interaction between the investment and financing process for the planning period. The model presented in this paper integrates the investment and financing process by the use of simulation. The measure used to link these two systems is the rate of return required on new investment in order for decision makers to achieve their desired earnings-per-share growth goal. The model provides top management a tool to communicate their expectations to lower levels of management, thereby allowing them to measure and evaluate the impact of various sets of assumptions on the company's strategic plans.
ISSN:0377-2217
1872-6860
DOI:10.1016/0377-2217(79)90027-4