JNTU MBA - Strategic Investment and Financing Decisions Syllabus - toscaeetslakken.comImportance of Capital Budgeting Decisions Capital budgeting is a process used to determine whether a firms proposed investments or projects are worth undertaking or not. The process of allocating budget for fixed investment opportunities is crucial because they are generally long lived and not easily reversed once they are made. So we can say that this is a strategic asset allocation process and management needs to use capital budgeting techniques to determine which project will yield more return over a period of time. The foremost importance is that the capital is a limited resource which is true of any form of capital, whether it is raised through debt or equity. This may result in the selection of less profitable investment proposals if the budget allocation and utilization is the primary consideration. So the management should make a careful decision whether a particular project is economically acceptable and within the specified limits of the investments to be made during a specified period of time. In the case of more than one project, management must identify the combination of investment projects that will contribute to the value of the firm and profitability.
Strategic Financial Management [SFM] - Overview - Basic Principles - Corporate Strategy & Its Levels
Strategic investment and finance decisions
Mergers and acquisitions strategies are not risk-free, potential problems in achieving success include integration difficulties, inadequate evaluation of target, inability to achieve synergy, and complexity. Such strategies can fail for many reasons including inadequate evaluation of targets or inadequate pre-decision control mechanisms. Mergers and acquisitions are reviewed in this chapter as strategic investment decision-making perspective. Established financial analyses remain important in appraising investment choices, despite their limiting assumptions and their recognised shortcomings in capturing strategic project dimensions. However, managers balance these economic analyses with less-structured, strategic analyses underpinned by informed judgement. The fact that empirical studies reveal a continued reliance on judgement by investment decision-makers does not mean that rational economic analysis is a futile exercise.
Any person, corporation, or nation should know who or where they are, where they want to be, and how to get there. A good strategic plan includes metrics that translate the vision and mission into specific end points. This article aims to explain how finance, financial goals, and financial performance can play a more integral role in the strategic planning and decision-making process, particularly in the implementation and monitoring stage. An effective mission statement conveys eight key components about the firm: target customers and markets; main products and services; geographic domain; core technologies; commitment to survival, growth, and profitability; philosophy; self-concept; and desired public image. For internal analysis, companies can apply the industry evolution model, which identifies takeoff technology, product quality, and product performance features , rapid growth driving costs down and pursuing product innovation , early maturity and slowing growth cost reduction, value services, and aggressive tactics to maintain or gain market share , market saturation elimination of marginal products and continuous improvement of value-chain activities , and stagnation or decline redirection to fastest-growing market segments and efforts to be a low-cost industry leader.
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Corporate finance is the division of finance that deals with financing, capital structuring, and investment decisions. Corporate finance is primarily concerned with maximizing shareholder value through long and short-term financial planning and the implementation of various strategies. Corporate finance activities range from capital investment decisions to investment banking. Corporate finance departments are charged with governing and overseeing their firms' financial activities and capital investment decisions. Such decisions include whether to pursue a proposed investment and whether to pay for the investment with equity, debt, or both.