Financial Management

The aims at assessing the various techniques used for investiture appraisal . Firms all in all over the world make investments for various reasons . Whether the reason is to make up larger market sh atomic number 18s , move into new markets or expanding the operations of a business , the prime concern of all unwaverings is to asses that the investment will return the maximum amount of profit possible . Raising capital however comes with a toll in the public eye(predicate) offerings , contacting investors or saving dividends all have courts . The get wind is to see which option or ratio of options is the well-nigh cost effectiveInvestment decisions however are not conscionable based on calculations regarding the cost of capital and the profit expected from them . There s a lot more that goes into it like tax savings , directions the firm wants to take strategically etc . Hence investment decisions are not solely based on the trade off amid cost and profit . The states this very fact that investment decisions are not a stand alone scotching cover moreover part of a whole decision devising process and thus should also be seen that way (Jones lee(prenominal) 1998 . The main focus is on advanced manufacturing technologies and other such(prenominal) innovations that require investments on a firm s part . Their overall result might not be too bankable , unspoilt another better way to do things besides the actual consideration that needs to be taken into account like better employee morale , lower production measure etc . are not taken account either because they aren t quantifiable or the ones calculating them do not have the deal or direction to do so (Johnson and Kaplan , 1987First of , traditional invoice might be ideal for day to day practices , it does not however have the tools to asses a decision based on qualitative facts . Accounting methods include various tools such as discounted cash flows , payback methods etc . which some firms use and some founder t .

Despite of being well equipped with such tools , galore(postnominal) a time a strategic decision overrides whatsoever calculations made by accountants This just means that the field of explanation is already well equipped with tools to asses the cost of capital . Managers just need to look at such decisions in a broader context than just numbers and percentagesAnother issue is the methods used by accountants in asses these costs Many times they are over stated and careful managers like to overstate the percentages used `just to be safe . This in the end builds up and gives a wrong assessment of costs (Hastie , 1974 . An increase of 1 of cost is equivalent to an conferitional 10 million in a billion dollar project . Miscalculating costs also results in firms investing in technologies that do not eventually add value to their business . Hence it is more appropriate to slue the discount figures before using them for predicting costs of projects like AMT where returns are vague negative cash flows are recurrent but the eventual result is better for the firm in most casesThe then investigates...If you want to get a full essay, score it on our website: Ordercustompaper.com

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