When selecting among possible product-market strategic plans,
A) the total profit approach tends to support plans that will be profitable in the short term even if longer term profits would be higher with another plan.
B) the total profit approach requires estimates of sales, costs, and profits.
C) the total profit approach compares plans that require the same investment.
D) None of these statements is true.

Question

Quizplus · Accepted Answer

The total profit approach requires estimates of sales, costs, and profits, as it aims to compare and select among possible product-market strategic plans based on the long-term profitability potential, not just short-term gains. The approach considers the net present value of cash flows, including the initial investment and future earnings, and seeks to maximize the total profit over the planning horizon. Choice A is incorrect because the total profit approach looks beyond short-term profitability, while choice C is incorrect because it compares plans based on their overall profitability potential, regardless of the investment required.

When Selecting Among Possible Product-Market Strategic Plans