Which of the following is an outcome of preparing financial forecasts and budgets?

Preparing financial forecasts and budgets is essential for effective business planning and management. One of the primary outcomes of this process is the development of a long-term forecast. This forecast serves as a roadmap for the business, allowing for strategic planning over an extended period, which helps in aligning resources to achieve overall business objectives. By projecting future financial performance, organizations can anticipate potential financial needs, adjust their operations accordingly, and set realistic goals.

Long-term forecasts provide insights into market trends, potential revenue streams, and cost management strategies, enabling businesses to make informed decisions that affect their growth and sustainability. This foresight is crucial for risk management as it helps businesses prepare for economic fluctuations, changes in consumer demand, and other uncertainties.

In contrast, the other options do not align with the positive outcomes associated with preparing financial forecasts and budgets. Unexpected expenses may arise due to poor planning or failure to anticipate costs, while disregarding cash flow statements could lead to financial mismanagement. Lastly, focusing solely on short-term financial goals undermines the importance of long-term planning and can jeopardize the overall health of the business.