Why Calculate Yearly Costs in Business Financial Planning?

Question:

What is the primary reason for calculating yearly costs in business financial planning?

A) To determine monthly payroll expenses.

B) To assess short-term cash flow needs.

C) To evaluate the long-term financial sustainability of the business.

D) To identify daily operational expenses.

Answer:

C) To evaluate the long-term financial sustainability of the business.

Explanation: Calculating yearly costs is essential in business financial planning as it helps evaluate the long-term financial sustainability of the business. This involves assessing the overall financial health and ensuring that the business can maintain its operations and growth over an extended period. While monthly payroll expenses, short-term cash flow needs, and daily operational expenses are important, yearly cost calculations provide a broader perspective on the financial stability and planning required for future success.