...more or less continuous process and it is carried out by top management. The role of any Finance Manager is to critically evaluate proposal, evaluation of alternative proposal and select best one. The following are the some of the cases where heavy capital investment may be necessary. A) Replacement of fixed assets: - To replace old Assets. To buy Asset with latest technology. B) Expansion: - It means increase in production capacity to meet additional demand. C) Research and Development: - It is required for those industry where technology in changing rapidly. D) Diversification: - To set up factories, to fulfill need of various markets. To reduce dependency on one market E) Miscellaneous: - To meet legal norms, such as investment in pollution control equipment. 2. Features and significance of capital budgeting Capital budgeting includes investment for long firm funds for long term and their utilisation. Capital budgeting decision affects profitability of firm. Therefore these decisions are very important. A wrong decision taken by finance manager may affect firm’s profitability. The relevance and significance of capital budgeting may be stated as follows. A) Involvement of heavy funds: - Capital budgeting decision requires large amount of capital. Therefore it is absolutely necessary to evaluate investment proposal carefully, to arrange funds in time and to see that they are put to most profitable ways. B) Long term effect: - Capital decisions...
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...Quality Metal Service Center Prob What action are needed to make in the control systems of Quality in order to achieve higher levels of sales and profits? The group is taking the point of view of Edward Brown, president and chief executive officer of Quality Metal Service Center Analysis ROA is the indicator that the company is profitable or the company’s assets generates revenue. The Economic Value Added is a good measure for evaluation of the performance of investment centers, The current compensation system of district managers is affected by his or her region’s performance, 75% was based on district performance and 25% was based on his or her region’s performance. The investment in machine of $540,000, 10 years cash inflow of $286,000 yields PV of cash inflow of $39,182 and a payback period of 4.5 years. Ken Richards proposal can make a lot of profit for the company The bonus of the district managers should be solely based on his district’s performance so that they will not be affected by the poor performance of others or motivation not to perform well because they will still have good bonus if the region performs well while his or her district is not. Reco Accept the capital investment proposal to Quality because the payback period of 4.5 years is lower than the standard of 10 years and QMSC will have positive cash flow. Ken Richards should send the proposal to the home office for approval because this will increase the market share and a lot of profits...
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...resistance from entrenched ideologies and interests in the U.S, the U.K, and the IMF prevented the reforms and rearrangements in the international financial system from happening. ➢ The East Asian crisis---the severest jolt to the world economy since the Oil Shock in early 1980s. ➢ Asian Crisis ---spread from Thailand to Indonesia, the Philippines, Malaysia and Korea. Sequences---Export decline ( loss of investors’ confidence( Currency devaluation due to lack of foreign reserve( IMF emergency fund requiring tight budget and monetary policy( increase in non-performing loans and damage in domestic industries ➢ Drastic increase in international private capital inflow in the ‘90s was key to understand this crisis. Liberalization within a flawed policy framework ➢ Inadequate regulation to cope with capital inflow---lack of experience and expertise, the predominance of short-term debt (which made economies vulnerable to speculative attack), newly-licensed banks (with risky lending practices, and unproductive, speculative investments. ➢ Fixed...
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...financial needs are being provided by the members and the school (also referred to as the stakeholders), and it is the responsibility of each organization to make good use of available financial resources. As this financial responsibility of organizations to their stakeholders arises, they are required to establish a system of control that will ensure the integrity of all financial transactions. This financial integrity should then be completely and accurately captured in all financial records and reported periodically to the stakeholders. In essence, the system will be the organizations’ first line of defense against error, fraud, negligence, or dishonesty in arriving at the financial information. This system is aptly called the organizations’ internal control. However, it is not enough that organizations utilize their own internal control. There is a need to examine or review critically and systematically the organizations’ reports, documents, records, financial policies, and controls for the purpose of arriving at an objective conclusion regarding their accuracy, completeness, and reliability. This is called the external audit. Both the internal control and the external audit comprise the audit environment. There are five key players in an organization’s audit environment: the President, the Treasurer, the Finance Officer, the Internal Auditor, and the External Auditor. Each of them has certain responsibilities to ensure the credibility of the audit environment. The following...
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...and project selection Chapter Outline 1. The Strategic Management Process: An Overview A. Four Activities of the Strategic Management Process B. Scenario Planning: A Supplement to Traditional 2. The Need for an Effective Project Portfolio Management System A. Problem 1: The Implementation Gap B. Problem 2: Organizational Politics C. Problem 3: Resource Conflicts and Multitasking 3. A Portfolio Management System A. Classification of the Project B. Nonfinancial Criteria 4. Applying a Selection Model A. Sources and Solicitation of Project Proposals B. Ranking Proposals and Selection of Projects 5. Managing the Portfolio System A. Balancing the Portfolio for Risks and Types of Projects 6. Summary 7. Key Terms 8. Review Questions 9. Exercises 10. Case: Hector Gaming Company 11. Case: Film Prioritization 12. Appendix 2.1: Request for Proposal (RFP) 2.2 Contractor Evaluation Template Chapter Objectives • To identify the significant role projects contribute to the strategic direction of the organization • To stress the importance of establishing project priorities and top management support • To describe the linkages of strategies and projects • To write a set of hierarchical objectives for an organization • To describe a scheme for prioritizing projects that ensures top management involvement and minimizes conflicts • To apply an objective priority system to project selection. • To recognize that...
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...project selection Chapter Outline 1. The Strategic Management Process: An Overview A. Four Activities of the Strategic Management Process 2. The Need for a Project Portfolio Management System A. Problem 1: The Implementation Gap B. Problem 2: Organizational Politics C. Problem 3: Resource Conflicts and Multitasking 3. A Portfolio Management System A. Classification of the Project 4. Selection Criteria A. Financial Criteria B. Nonfinancial Criteria 5. Applying a Selection Model A. Sources and Solicitation of Project Proposals B. Ranking Proposals and Selection of Projects 5. Managing the Portfolio System A. Balancing the Portfolio for Risks and Types of Projects 7. Summary 8. Key Terms 9. Review Questions 10. Exercises 11. Case: Hector Gaming Company 12. Case: Film Prioritization 13. Case: Fund Raising Project Selection 14. Appendix 2.1: Request for Proposal (RFP) A. Contractor Evaluation Template Chapter Objectives • To identify the significant role projects contribute to the strategic direction of the organization • To stress the importance of establishing project priorities and top management support • To describe the linkages of strategies and projects • To describe a scheme for prioritizing projects that ensures top management involvement and minimizes conflicts • To apply an objective priority system to project selection • To recognize that today’s world may require a shorter range...
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...Part A: BUDGETING PROCESS 1. Definition [1] * A budget is the financial blueprint or action plan for an organization. It translates strategic plans into measurable expenditures and anticipated returns over a certain period of time * Budgeting is the process of creating and preparing an organization for the future. 2. Objectives[2] * The budget provides a yardstick for future results can be compared; * It allows management to plan and forecast in the areas of capital adequacy in work and or other types of scarce resources available; * Budget may direct cost of capital towards the most beneficial; * Budget support planning and control income and expenditure for maximum profit can be achieved; * It acts as a guide for management decisions when unforeseen conditions affect the budget; * It support for decentralization of responsibilities for each of the managers involved. With the establishment of the budget, the relevant managers will better understand what the company expected from them. So there is a congruence of objectives between the company and employees. 3. Classification of budgets [3] A series of budgets are linked together in a Master Budget. The major parts of Master Budget are Income Statement budgets and Balance Sheets budgets as follow: 4.1 Income statement budgets: * Sales budget: indicates for each product the quantity of estimated sales and (2) the expected unit selling price * Production budget: ...
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...EXCEL International Journal of Multidisciplinary Management Studies Vol.2 Issue 1, January 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/ AN OVERVIEW OF FOREIGN DIRECT INVESTMENT IN INDIA SYED AZHAR*; K.N.MARIMUTHU** *Research Scholars, School of Management Studies, University of Hyderabad, AndhraPradesh-500046. ABSTRACT This paper attempted to make an analysis of FDI in India and its impact on growth. It also focuses on the determinants and needs of FDI, year-wise analysis, sectoral analysis and sources of FDI and reasons. One of the economic aspects of globalization is the fact that increasing investments in the form of foreign direct investments. In the recent times due to the global recession most of the countries have not been able to pull investments. India has been able to attract better FDI’s than the developed countries even during the crisis period also. Especially in the recent years the FDI in India has been following a positive growth rate. Since 1991 the government has focused on liberalization of policies to welcome foreign direct investments. These investments have been a key driver for accelerating the economic growth through technology transfer, employment generation, and improved access to managerial expertise, global capital, product markets and distribution network. FDI in India has enabled to achieve a certain degree of financial stability; growth and development to sustain and compete in the global economy...
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...the International Organization for Standardization is a set of five international standards for quality management adopted by more than 85 countries. Answer: True Difficulty: 2 Objective: 1 3. Quality of design measures how closely the characteristics of products or services meet the needs and wants of customers. Answer: True Difficulty: 2 Objective: 1 4. In the banking industry, depositing a customer's check into the wrong bank account is an example of quality of design failure. Answer: False Difficulty: 2 Objective: 1 This is an example of conformance quality failure. 5. Costs of quality (COQ) reports usually do not consider opportunity costs. Answer: True Difficulty: 2 Objective: 1 6. A control chart identifies potential causes of failures or defects. Answer: False Difficulty: 2 Objective: 2 This is a definition of a Pareto diagram. 7. A cause-and-effect diagram is used to help identify potential causes of defects. Answer: True Difficulty: 2 Objective: 2 8. Allocated cost amounts are an important determinant of the costs of a quality improvement program. Answer: False Difficulty: 2 Objective: 3 Allocated costs are usually ignored in calculating the costs of a quality improvement program. 9. Most companies expend a substantial amount of dollars measuring the financial costs of design quality. Answer: False Difficulty: 2 Objective: 3 Most companies do not expend a substantial...
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...the major foreign currency for foreign trade and foreign reserve, the developing countries have limited options to control their respective currency. This same was experienced by many developing Asian countries in the recent financial rout. Determination of Exchange Rate and its Fluctuations Like other prices, exchange rate also changes with the changes in the state of market. Just as other prices depend on supply and demand, exchange rate also depends on the configuration of forces of supply and demand. However, two important facets have to be noted: (i) Unlike goods and services, foreign exchange has no direct cost of production. It has only opportunity cost (Walras.1874). Import bills have to be paid through export earnings. So cost of production of exportable surpluses may be taken to constitute the direct production cost of exports and indirect cost of imports (Aggarwal, R. (1981)). Opportunity cost is accounted by with drawl of exportable surplus from domestic consumption. Fluctuations are a natural characteristic of foreign exchange rate market, provided that the exchange rate is not an administered price. If exchange rate is an administered price, it is determined administratively by the central bank of the country. Administered foreign exchange rate is generally endowed with stability as both demand for and supply of foreign currency is under the control of central bank. Exchange rate, on the whole, fluctuates like other prices, which generally varies with change...
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...projects. To complete a project and help solve a problem within the company, the proper personnel must be employed and trained properly. Developing an information system through initiation, analysis, implementation, and support is known as the System Development Life Cycle or SDLC. This system must be known and understood by anyone employed by the company. Other than the SDLC, the right database applications must be in place for a company to be successful at developing the right products. Riordan Manufacturing is the industry leader in plastic injection molding. A request has been made to help improve the inventory process and also make it more efficient. Included in the following will be a definition of the project, new proposal, system upgrades, and some improvements to the current system. Once all the necessary changes have been made, the system can then be changed or tweaked as deemed necessary to make sure things are as perfect as possible. Definition of Project Riordan Manufacturing wants to improve the inventory process and make it more efficient to better serve the consumer and their servers. Riordan is currently designing the plastic molds that help make plastic beverage containers, fans, heart valves, medical stints, and custom plastic parts (Riordan Manufacturing, 2004). Currently 550 employees work at Riordan Manufacturing in locations such as San Jose, California, Albany, Georgia, and Hangzhou, China. When developing a company with operations...
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...is quite different from it as they invest in a foreign nation. The Foreign Institutional Investor is also known as hot money as the investors have the liberty to sell it and take it back. But in Foreign Direct Investment, this is not possible. In simple words, FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that easily. This difference is what makes nations to choose FDI’s more than then FIIs. FDI is more preferred to the FII as they are considered to be the most beneficial kind of foreign investment for the whole economy. Foreign Direct Investment only targets a specific enterprise. It aims to increase the enterprises capacity or productivity or change its management control. In an FDI, the capital inflow is translated into additional production. The FII investment flows only into the secondary market. It helps in increasing capital availability in general rather than enhancing the capital of a specific enterprise. The Foreign Direct Investment is considered to be more stable than Foreign Institutional Investor. FDI not only brings in capital but also helps in good governance practises and better management skills and even technology transfer. Though the Foreign Institutional Investor helps in promoting good governance and improving accounting, it does not come out with any other benefits of the FDI. While the FDI flows into the primary market, the FII flows into secondary market. While FIIs are short-term...
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...thus Indian channels were telecast and movies were distributed abroad. At that time the first opportunity of the firm was given by the possibility to establish a partnership that could give to the company an edge to expand itself all over the world. Even though UTV had this important opportunity it should not underestimate the possibility of future growth given by the local market, in fact that market is considered one of the most important from a growth perspective. Again the company had to balance the possibility of expansion in foreign market between the chance of enlarging the base of UTV thinking, for example, to an acquisition of other local companies. In 2006 the firm was put in front of important decision, UTV was evaluating the proposal for an alliance with The Walt Disney Company that proposed to acquire Hungama TV and made a significant investment in UTV(14,9%), this offer signed a turning point for UTV that had to choose the best...
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...Week 5 Assignment from the textbook Nancy Schwartz ACC/400 February 22, 2016 Lee Kroll E25.4 Sapsora Company uses ROI to measure the performance of its operating divisions and to reward division managers. A summary of the annual reports from two divisions is shown below. The company’s weighted-average cost of capital is 12 percent. Note: Economic Value Added (EVA) (p. 1087) A specific type of residual income that is computed by multiplying the after-tax weighted average cost of capital by total assets minus current liabilities and subtracting that product from the after-tax operating income. ------------------------------------------------- Division A Division B Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,000,000 $8,750,000 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 1,750,000 After-tax operating income . . . . . . . . . . . . . . . . . . 1,000,000 1,180,000 ROI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% 14% a. Which division is more profitable? Division A b. Would EVA (Economic Value Added) more clearly show the relative contribution of the two divisions to the company as a whole? Show the computations. EVA = After-Tax Operating Income – {Division’s Total – Division’s Current} x Weighted- Assets Liabilities Average Cost of Capital | Division A | Division B | Total Assets | 6,000,000 | 8,750...
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...of TV channels Regional Air Transport up to 49 percent Duty Free Shops Limited Liability Partnerships (“LLP”) Share swap transactions Our Comments These are reflective of the Government’s focus on facilitating ease of doing business in India and are a means of facilitating foreign investors in exploiting tremendous investment potential available in India. As such, these reforms are good examples of minimum government -maximum governance and should encourage FDI inflows into the country. II. Cabinet Committee on Economic Affairs: As per the extant FDI Policy, for sectors under Government approval route, Foreign Investment Promotion Board (FIPB) considers proposals having total foreign equity inflow up to Rs. 3,000 crore and proposals above Rs. 3,000 crore require approval from Cabinet Committee on Economic Affairs (CCEA). As per revised policy, FIPB to deal with FDI proposals with foreign equity inflow upto Rs. 5,000 crore whereas CCEA nod would be required for such proposals where foreign equity inflow is Rs. 5,000 crore or more. Our Comments This is another step of reform to ease the administrative process for the investors with minimal interference of the Government, as projects that require CCEA approval typically take a longer time. III. Significant sectorial and other reforms The Government has brought reforms in FDI policy and has eased norms across 15 significant sectors including defence, banking, construction development, single brand retail,...
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