Managerial Accounting Discussion Reply Posts 3 reply posts
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Managerial Accounting Discussion Reply Posts 3 reply posts
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A- Articles annotated bibliography Malenko, A. (2019). Optimal dynamic capital budgeting. The Review of Economic Studies, 86(4), 1747-1778. In this article by Malenko (2019), the optimal way of allocating capital in an organization has been brought into focus and how all budgeting is done to achieve the maximum efficiency and return on the investment. It is highlighted in the very beginning that the internal allocation of budgets in the organization for various aspects such as operations, management, human resources, backup, technology, compliance, and emergency procurement. The problem comes in all of this while on different managerial levels as the lower-level managers do not have that much wider and in-depth coverage of the financial standing and conditions of the organization and generally want to spend more on the projects and the other aspects described in the last line. Therefore the article has found that the auditing by the head management or deciding making chairs of the organization is very critical for passing out a plan and allocation of the capital. The author has taken into consideration the aspect of incentive and punishment for the divisional managers after the headquarters auditing process if the report suggested that lower options in expenses were possible. The model has been developed for the same and a budgeting mechanism has been developed in the last in which there is a threshold for financing related separations. This article has provided a framework for streamlining the capital budgeting related problems in the organizations. Vochozka, M., Rowland, Z., & Vrbka, J. (2016). Financial analysis of an average transport company in the Czech Republic. NAŠE MORE: znanstveno-stručni časopis za more i pomorstvo, 63(3 Special Issue), 227-236. In this summary by Vochozka, Rowland & Brbka (2016), a simple financial analysis has been done for the transport company in the Czech Republic and it has been shown that how the budgets and capital allocations actually come into play. Financial Analysis has been pitched as one of the most effective tools or techniques for the determination of the financial conditions and evaluation of the organization’s efficiency. The capital-related strengths and weaknesses can be easily determined by using and applying this tool as guided and presented by the authors here. According to the article, there are three 3 main inputs that are needed in doing a financial analysis of an organization including firstly the balance sheet of a financial year or quarter, secondly, the cash flow statement containing in and out details of the capital, and lastly the profit and loss statement. This article has concluded that there are some fixed evaluation tactics such as ratios of activities, profitability, debt, liquidity and some other comprehensive evaluation methods are there which can be very useful and help in adjusting the future budgeting aspects of the organization. The future potential of the transport industry in the country was projected by analyzing the data with the above techniques and the best practice for maximizing the benefits to the companies and improvement in performance was also formulated and presented as a conclusion. B- Learnings acquired from the articles There are many things that the articles above have furnished and presented here. First of all, the basic concept revolving around capital budgeting has been made clear in the first article and the importance of having an auditing program in the organization has been clearly understood. The second article here was very focused on the financial analysis and all the related inputs that this process need has been elaborated and explained in it which is important to understand after capital budgeting. There is a very key connection between both these topics as capital budgeting prepares the organization for the financial year and guides how to spend and where to look for cost-cutting and lastly the way to gain maximum efficiency in the process (Graham & Sathye, 2017). After the capital budgeting application is finished and the year is done for the organization, financial analysis comes into the picture as it makes it clear that whether the capital budgeting done prior to this year expenditure was successful and accountable or not and whether the company has made profit or loss from that planning. Both topics actually complete each other and work as a duo for complete financial efficiency and set up of the organization as learned from the articles. C- Using these concepts by managers These concepts can be used by the managers in many ways for the decision-making process as the capital budgeting and auditing needs as explained can help him in getting the accurate and exact knowledge of how the allocation can be altered and where to put it as per the need. The concept regarding the financial budgeting will help the managers to evaluate the ratios of financial expenses and the balance sheets upon which he can finalize and decide what all changes are needed to be made to counter the inefficiencies found this time (Warren & Jack, 2018). It will help him to get rid of the shortcomings and take more responsive and quick decisions for generating more value for the organization. In the decision- making aspect, the knowledge harnessed by going through these articles will be finding their use while deciding the budget allocation for the future based on the activities and performance evaluation of the past. References Graham, P. J., & Sathye, M. (2017). Does national culture impact capital budgeting systems?. Australasian Accounting, Business and Finance Journal, 11(2), 43-60. Warren, L., & Jack, L. (2018). The capital budgeting process and the energy trilemma-A strategic conduct analysis. The British Accounting Review, 50(5), 481-496.
Capital budgeting in all its essential meaning is the decision taken by the organization to decide whether a project or venture is worth investing. The assessment is done by analyzing the cash flow projects of both inflows and outflows over the project’s lifetime and see if there are any substantial gains. There are different ways of analysis: Discounted cash flow analysis, present value analysis, and throughput analysis
Feng, W., & Figliozzi, M. A. (2012). Conventional vs Electric Commercial Vehicle Fleets: A Case Study of Economic and Technological Factors Affecting the Competitiveness of Electric Commercial Vehicles in the USA. Procedia – Social and Behavioral Sciences, 39, 702–711. https://doi.org/10.1016/j.sbspro.2012.03.141
With the rise of the electric vehicle market and the need to have a sustainable market for automobiles, this paper explores the capital budgeting analysis on electric trucks and compares them to diesel trucks in terms of investment, problems and best way to get return on investment. One of the author Miguel A. Figliozzi, the founder and co-director of the Transportation Technology and People (TTP) Lab, elucidated the facts along with the co-author. The intended audience for this article can be potential company executives and students who are curious about the benefits of such advancement in the auto industry. The conclusion is that if the investments are made in electric trucks, they need to be utilized for more than 28,000 miles per year and assume diesel trucks have MPG of 8.2 miles.
Grinstein, Y., & Tolkowsky, E. (2004). The Role of the Board of Directors in the Capital Budgeting Process – Evidence from S&P 500 Firms. SSRN Electronic Journal, 12–21. https://doi.org/10.2139/ssrn.625141
As we understand the importance of capital budgeting in terms of rise and fall of new projects, new innovation breakthroughs and new ways to redesign the world, it is important to know how the board of directors decide such ways of investing that go beyond academic knowledge. One of the authors is from Cornell University- Yaniv Grinsten, along with the co-author found that the board has four main purposes in the process. The intended audience for the paper can be management students, project managers and potential board of directors in order to get a better understanding of the real life scenario of decision making. They review and approve: huge capital and infrastructure expansion or acquisition requests, annual budgets, horizontal and vertical merger and transactions, and continuously monitor the performance of approved and delivered projects.
Sierzchula, W., Bakker, S., Maat, K., & van Wee, B. (2014). The influence of financial incentives and other socio-economic factors on electric vehicle adoption. Energy Policy, 68, 183–194. https://doi.org/10.1016/j.enpol.2014.01.043
Again, to continue with the topic of electric vehicles, this paper explores the financial analysis of owning an electric vehicle along with added benefit of government incentives. The market share of electric vehicles is dependent on charging infrastructure, financial incentives and local production in countries will help bring down the cost and eventually increase the consumption. The author, William Sierzchula, from Delft university, along with co-authors agree that in 2012, there is not much incentive to increase the consumption of EV cars in the market despite the incentives. The intended audience for this paper can be anyone who’s interested in EV market analysis.
Hardman, S., Chandan, A., Tal, G., & Turrentine, T. (2017). The effectiveness of financial purchase incentives for battery electric vehicles – A review of the evidence. Renewable and Sustainable Energy Reviews, 80, 1100–1111. https://doi.org/10.1016/j.rser.2017.05.255
This paper explores if incentives really drive the sales of EV vehicles, especially in the US. One of the author Scott Hardman, Plug-in Hybrid and Electric Vehicle Research Center, Institute of Transportation Studies, University of California, Davis, United States, along with co-authors investigate the time at which the incentives need to be given, with emphasis on giving them before and during purchase and not after that. The analysis also states that removing such benefits is bad after some time as it negatively affects the purchasing of EV vehicles.
My understanding is that all of the concepts are interlinked – the decision taken by the board of directors can change the market and can drive consumerism into a different direction and at the same time if the consumers are demanding change, the market is in turn transformed into something that companies need to keep in mind. Also, financial incentives are not the only way to market share increase, it is the timing of the incentives that propel sales.
As a manager, I would make better decisions in terms of understanding the cash flow projections of new projects and any changes that need to be implemented. As in, it might be so that existing projects might need some cash to reduce inefficiencies and improve productivity. But if the project has an expiry date that is fast approaching, I would understand how much room there is for the company to bear the negative cash flow. I would also be more aware of the way that the companies tale decisions as that is driven by rapid changes in the market and that means that I would need to improve my skills to better adapt to the changes.
Capital Budgeting and Financial Analysis
Thi, M. H. V. (2018). Application and effects of capital budgeting among the manufacturing companies in Vietnam. International Journal of Organizational Innovation (Online), 10(4), 111-120.
As per the Article above, Capital budgeting encourages an association to recognize the potential advantages that can be drawn by putting resources into a long-term project, assume whether to stretch out the old activity or to put resources into another activity of an organization. The review developed by the global diary of hierarchical advancement portrays the advantages showed up by the assembling organizations in Vietnam by utilizing capital budgeting. The overview assists with understanding the utilization of the strategies of capital budgeting and their conceivable impact
Kral, P. (2017). The methodological framework of financial analysis results in objectification in the Slovak Republic. J. Mod. Account. Audit, 13, 394-400.
Investigating the organization’s financial information assists with assessing the organizations’ presentation. To comprehend the significance of financial Analysis an investigation was developed by the University of Zilina, Slovakia. The investigation was planned to externalize the technique for financial analysis inequality with the state of endeavors of Slovakia (Kral, 2017). The martialness of the aftereffect of financial analysis is imperative to anticipate the financial presentation of an undertaking.
Restoring the articles assists with understanding the advantage of capital budgeting and the requirement for financial analysis in a venture. The cycle of Capital budgeting assists with estimating the acknowledgment or removal of an undertaking. Though financial analysis assists with estimating authoritative execution and encourages the financial client to settle on a venture choice. Being a restricted asset, in this way while managing capital, specific aptitudes chiefs are required something else, the organization will get influenced for a more extended period.
Additionally, setting up the financial report won’t be useful for the speculators or other financial clients. Consequently, contrasting the aftereffect of one substance and the other element from a comparable industry and having a comparative business technique encourages the client to comprehend the outcome all the more precisely and to settle on the choice in like manner.
As a manager, it is critical to see all the potential dangers a business can be confronted with a potential business venture. Consequently, as the examination proposes understanding the sort of speculation and the strategy to be utilized for capital budgeting can impact dynamic. For instance, if an organization needs to evaluate whether to acknowledge a venture proposition and if the chief uses the NAV strategy or the IRR technique for esteeming the proposition. At that point, both the strategy will give an alternate outcome and furthermore affecting administrative dynamics. Again, for an organization setting up the financial report as indicated by norms shows the presentation of the organization.