Got a tricky question? Receive an answer from students like you! Try us!

Capital budgeting practices in different countriesindustrial corporations - Essay Example

Author : qhayes
Download 1

Summary

USA being a highly developed nation uses the most sophisticated techniques within their firms. The paper will discuss the capital budgeting techniques used in the Chinese and Indonesian firms and will highlight the similarities and the dissimilarities with future implications. …

Extract of sample
Capital budgeting practices in different countriesindustrial corporations

In today’s world of complex business process, corporate capital budgeting is one of the most important and critical decisions faced by the financial managers. In businesses individuals invests large sums of money which generate cash flow benefit over a period of more than one year. This is the crux of capital expenditures. The goods on which capital expenditures are made include purchasing of new equipments, acquiring of new technologies and that of launching research and development programs and so on. Along with these capital expenditures, a huge volume of cash outlays are involved with significant implications on the future values of the company. Analysis of capital expenditures is a crucial dimension in the business sphere. In this respect concept of capital budgeting (CB) can be introduced. In simple terms it is a business practice utilized for planning the acquisition of long term investments. The prime factor included in capital budgeting is that the organization or the company which builds and starts to use in one year will be highly useful in the future years (Finkler, 244).
The importance of capital budgeting is immense as it includes decisions for the future profitability of the companies. Now this technique varies across geographical borders and difference exists in a stark manner within the corporations of developed and developing countries. Developed countries like United States of America exercise thorough scientific analysis associated with the capital budgeting techniques. ...
Download paper

Related Essays

William Hill Plc acquired 624 betting shops of Stanley Leisure – an Evaluation
The researcher states that there are different forms of growth approaches that companies generally follow. Typically if a company wants to make growth, then in such circumstances the company has two choices whether to go for an organic growth or to go for acquisition or a combination of both. For organic growth, the companies generally expand their business operations by opening up new branches, adding up new product lines etc. On the other hand, for acquisitions, the companies generally purchase an existing business such that the company owns that business and in this way it brings expansion…
10 pages (2510 words)
Capital Budgeting. Payback Period. NPV.
Another reason why these decisions are so important is that these decisions involve a large outlay of funds. Therefore, it is necessary that these decisions are taken with due diligence. These decisions cannot be reversed at a low cost. So, any mistake made is very costly to the firm. The capital budgeting process that a manager uses depends on a few factors such as the manager’s level in the organisation and the size of the project and the organization. The following steps are the typical steps followed by most managers. Step One: Generating Ideas Coming up with good investment ideas is the…
4 pages (1004 words)
Capital Budgeting
There are various capital budgeting techniques which are used in evaluation of a project so to determine its viability they include; net present value, internal rate of return, profitability index, average rate of return, pay-back period and modified internal rate of return. Guillermo Furniture is faced with three investment situations, which are to continue with the current production, adopt high-tech production, or act as a broker. Therefore, there is need to ascertain which of the investment will yield the highest returns to the firm. In order to carry out efficient investment appraisal, we…
2 pages (502 words)
Capital Budgeting Analysis
This shows that the company has improved on the efficiency of the usage of the assets of the company. This is also depicted by an improving asset turnover over the three year period. In 2003, the company generated $1.25 of revenue for every $1 invested in the assets of the company. Moreover, the company is also maintaining a strong control on its administrative and selling expenses; this is depicted by an improving net profit margin. This signifies that the company has strong growth prospects in future and could pave it way to become the market leader in its line of products. Figure 1 Figure 2…
4 pages (1004 words)
McKenzie Corporation‘s Capital Budgeting
It is of immense importance that one gets the knowledge on the market as well as comprehends the nature of the economy. Based on the calculated values the stockholders are better off with an expansion in the company. This is because the value is higher by $9 million that implies that the firm's value, as well as the profits, would increase.
8 pages (2008 words)
Capital Budgeting PROJECT ANALYSIS
The company’s target market will be the students and friends of the college. The students will be offered the skis at a discounted rate of $250, and the outsiders will purchase the skis at $600. Since the project will be generating revenue, there will be no need of finding other means of funding as the project’s operations are anticipated to generate enough revenue that will be ploughed back as a means of funding. The project was selected for the following reasons: First, project will be beneficial to college in terms of learning and management to the students because they will be exposed…
4 pages (1004 words)
Corporate Finance: Traditional Capital Budgeting
Management use various Capital budgeting techniques to make effective use of these resource to maximize firm’s value (Bennouna, Geoffrey & Marchant 2010). The key objective of an organization is to determine the investment required for expansion of the project, modernize the existing equipment to reduce the costs or to anticipate demand (Bennouna, Geoffrey & Marchant 2010). In order to make further investment, managers determine the payback period and accounting rate of returns of the long term investments (Harrison & John 2010). Though there are several Capital Budgeting Techniques, However…
6 pages (1506 words)