ABSTRACT
Management must regularly commit resources for both long-term and short-term purposes and, because this commitment will always involve risk, a careful assessment of the anticipated results of any project on the financial position should be made before a decision is taken, and before resources are irrevocably committed. A periodic evaluation is needed, after resources have been invested, to report what has been achieved, to examine the amount of the profit, or the extent of the loss, and to consider the effect of implementing the plan on the financial state of the business, in particular to note whether financial stability has been maintained or alternatively the extent to which it has been impaired. Aids to investment decisions, mathematical or otherwise, are important tools of management, but they do not provide a complete answer because they must depend on forecasts of the future rate of cash receipts and cash payments.
