The management of McAngus Inc. has never used formal planning techniques in the operation of its business. The president of McAngus has expressed interest in the recommendation of its accountants that the company investigate various techniques it could use to manage the business more effectively.
McAngus, a medium-sized manufacturer, has grown steadily. It recently acquired another company located approximately 1,000 miles away. The new company manufactures a line of products that complements the present product line. Both manufacturing plants have significant investments in land, buildings, machinery and equipment. Each plant is to be operated as a separate division headed by a division manager. Each division manger is to have virtually complete authority for the management of her or his division- each will be primarily responsible for the profit contribution of her or his division-each will be primarily responsible for the profit contribution of her or his division. A complete set of financial statements is to be prepared for each division as well as for the company.
The president and the current management team intend to concentrate their efforts on coordinating the activities of the two divisions and investigating and evaluating such things as new markets, new product lines, and new business acquisition possibilities. Because of the cash required for the recent acquisition and the cash needs for desired future expansion, the president is particularly concerned about cash flow and the effective management of cash.
Required:
Explain the objectives and describe the process that McAngus can use to plan for and evaluate the long-term commitment of its resources, including cash.