7.3c - Assessing Short and Long-Term Performance

Question 1

Short-termism definition

Answer 1

When businesses focus on the creation of short-term profits at the expense of the long-term interests of the business

Question 2

Advantages of taking a short-term approach:

Answer 2

• Happy shareholders
• Motivated workforce
• Good profitability and liquidity measures
• Can adapt to change in market

Question 3

Disadvantages of taking a short-term approach:

Answer 3

• Shortened tenure of leaders
• Businesses are less likely to invest
• Less investment in human capital

Question 4

Advantages of taking a long-term approach:

Answer 4

• Makes sure business is aware of PESTLE
• More open and flexible to change
• Can adapt to key factors in the external environment

Question 5

Disadvantages of taking a long-term approach:

Answer 5

• Can’t neglect the needs of shareholders

- May mean fine tuning of business is ignored