Premium Essay

Budgeting Strategies

In: Business and Management

Submitted By paolovaldez
Words 1203
Pages 5
CHAPTER II- Review of Related Literature and Study This chapter shall briefly discuss the correlation of previous studies and articles that are similar to this research. The chapter contains the Conceptual Framework of the Study and the Research Paradigm utilized in this research.

Thematic Approach of Discussion Budget, Savings, etc., what are the definitions of these terms? According to an article entitled “Financial Literacy to Everyone” at www.practicalmoneyskills.com, budgeting is plan for your future income and expenditures that you can use as a guideline for spending and saving. Budget came from the old French word “bougette” which means purse. It is practically, a plan and list of all planned expenses and revenue. It is a plan for borrowing, saving, and spending. So why Budget? An average student spends his allowance for books, student housing, tuition fee, and food. These are all expenses encountered not only by students but, in general, most of the people in the world. There are generally three types of expenses usually faced by students, the Academic, Living, and Personal Expenditures or Costs. Academic Costs are usually what eats up the total budget of students. It contains the different expenses that are required in able to carry out a student’s academic life. It varies from tuition fees until the very miniscule expenses utilized for photocopying hand-outs from your professor. Living Costs, on the other hand, are expenses that a student need for day to day living however, indirectly related to academics. These include your expenses in utilities (e.g. electricity, water, and internet bills), personal care expenses (shampoo, soap, etc.), and clothing and food expenses. Lastly, Personal Costs are expenditures that are unique yet still a part of a student’s budget. This includes leisure and entertainment expenses, emergency contingency funds for

Similar Documents

Premium Essay

Global Business Startegies

...Global Business Strategies Week 4 Discussion Questions MGT/448 May 02, 2013 Global Business Strategies Week 4 Discussion Questions What are the elements of capital budgeting? How do you determine these elements in the Global business arena? Provide examples of how you would use capital budgeting analysis to determine the desirability of global projects. There are three different types of capital budgeting processes: centralized, decentralized and integrated. In centralized capital budgeting, top management make all important strategic capital budgeting decisions. Operating managers bid on implementing projects selected by top management. In decentralized capital budgeting operating managers identify and initiate projects that are approved by top management based upon projected financial performance. Integrated capital budgeting has elements of both decentralized and centralized capital budgeting. Capital budgeting process defines the set and size of a firm’s real assets, which in turn generate the cash flows that ultimately determine its profitability, value, and viability. In principle, a firm’s decision to invest in a new project should be made according to whether the project increases the wealth of the firm’s shareholders. The two things to consider when you would use capital budgeting in global projects are the following; What will the Project Cost? This is the first and most basic question a company must answer before pursuing a project. Identifying the cost...

Words: 993 - Pages: 4

Premium Essay

Capital Budgeting

...SUMMARY OUTLINE CAPITAL BUDGETING PRACTICES OF INDIAN COMPANIES Introduction Corporate strategy provides the focal point for the firm's long-run strategic planning. The capital budgeting system, particularly for large strategic projects, is determined in the context of strategic planning and, thus, it is a top-down process. Corporate strategy and strategic planning play the most crucial role at the identification and evaluation phases. Operating and administrative capital budgeting decisions can be decided at lower /middle level of management within the overall strategic framework and guidelines from top management. The capital budgeting system at lower/middle level will largely be a bottom up process. It may be noted that external and internal environment provides a context to the company to establish and review its missions, concerns, and multiple objectives which, in turn, shape its corporate strategy. Objectives There are two objectives of this study: a) To document the capital budgeting policies and practices of companies in India, a developing" country, and contrast them with those of USA and UK, the developed countries b) To ascertain how business executives look upon the linkage between corporate strategy and investment decision-making. Sample and Methodology The study used interview-cum-questionnaire method and sent to 14 companies different businesses which had agreed to participate in all. Methods of Evaluation The study was...

Words: 441 - Pages: 2

Premium Essay

Capex Practice in India

...Management J. Volume 2 No. 1 (January 1989) ,' CAPITAL BUDGETING PRACTICES OF INDIAN COMPANIES I. M. PANDEY ' Objective " The objectives of this study are: (a) to document the capital bud geting policies and practices of companies in India, a developing country, and contrast them with those of USA and UK, the developed countries, and (b) to ascertain how business executives look upon the linkage between corporate strategy and investment decision-making. Capital expenditure planning and control is a process of facilitating decisions covering expenditures on long-term assets. Since a company's survival and profitability hinges on capital expenditures, specially the major ones, the importance of the capital budgeting process cannot be over-emphasized. Sample and Methodology We have followed an intensive interview-cum-questionnaire method. Two questionnaires—one dealing with investment evaluation practice and second with other phases—were sent to companies which had agreed to participate in the study. In all, 14 companies were studied. The responding companies belonged to different businesses. In terms of size (sales and number of employees), capital intensity (net tangible fixed assets), volume of spending (capital expenditure incurred), and level of technology, they represent a variety (Table 1). The study relates to 1984. •-, Capital Expenditure: How Defined Strictly speaking, capital expenditure includes all those expenditures which are expected to produce...

Words: 4786 - Pages: 20

Premium Essay

Sac Financial Statements

...Phase 3 Individual Project/DB Capital Budgeting Janella Chapman ACCT-614/Applied Managerial Accounting March 15, 2013 Professor Tracie Edmond I. Overview As companies look to grow and expand operations, product lines, or locations, capital budgeting is the method used by management in evaluating if projects and long-term investments will be profitable for the company. Capital budgeting analysis evaluates projects that will have cash flows for longer than a year. Capital budgeting helps management analysis if investments will be profitable and valuable to the company compared to the initial investment needed and the risk associated with the investment. There are many capital budgeting methods management may use to ensure the project or investment is aligned with the corporate strategy of a company. In the capital budgeting process, management evaluates different capital budgeting techniques to ensure the company has the resources to invest in the project, and also helps management determine if the investment will help achieve the goals and objectives of the company. The goal of capital budgeting is to evaluate the costs of an investment to the initial capital to determine if the investment will generate more capital or cash flow for the company. The four capital budgeting techniques used by management are Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Payback method. SAC has developed new manufacturing techniques to offer special...

Words: 1154 - Pages: 5

Premium Essay

Capital Budgeting: Advantages and Limitations

...CAPITAL BUDGETING: ADVANTAGES AND LIMITATIONS. SEPTEMBER 2012 CHAPTER ONE INTRODUCTION 1.0 Background Study Capital budgeting is the process by which firms determine how to invest their capital. Included in this process are the decisions to invest in new projects, reassess the amount of capital already invested in existing projects, allocate and ration capital across divisions, and acquire other firms. In essence, the capital budgeting process defines the set and size of a firm’s real assets, which in turn generate the cash flows that ultimately determine its profitability, value and viability. In principle, a firm’s decision to invest in a new project should be made according to whether the project increases the wealth of the firm’s shareholders. For example, the Net Present Value (NPV) rule specifies an objective process by which firms can assess the value that new capital investments are expected to create. As Graham and Harvey (2001) document this rule has steadily gained in popularity since Dean (1951) formally introduced it, but its widespread use has not eliminated the human element in capital budgeting. Because the estimation of a project’s future cash flows and the rate at which they should be discounted is still a relatively subjective process, the behavioural traits of managers still affect this process. Capital budgeting is a process...

Words: 7612 - Pages: 31

Premium Essay

Finance Theory and Financial Strategy

...Finance theory and Financial strategy Strategic Planning means several things. But it certainly is a part of the decision-making in resource management of the business benefits. Finance theory has significant advantages in understanding the function of capital markets, the valuation of real assets and financial assets. Discounted cash flow analysis(DCF) is a tool that derived from finance theory which has been widely used. However finance theory also has little effect on strategic planning and there are three differences between financial theory and strategic planning: 1. Traditional financial theory and strategic planning might have some differences in language and culture. 2. Discounted cash flow analysis might be used in an incorrect way of strategy therefore it is not acceptable in terms. 3. Discounted cash flow analysis might fail to apply a strategic, even if it is used properly. The most relevant financial concepts in strategic planning is firms’ capital investment decisions and it is also a critical component of “financial theory”. The theory is focused on cash flow and return on the investment. The tool used in investment decisions is net present valued (NPV) which was calculated from present valued minus required investment or which was reduced to discounted cash flow formula because the net present value is a matter of cash flow that will gain in the future. [pic] ...

Words: 1179 - Pages: 5

Premium Essay

Guillermo Furniture Store Analysis

...succeed within their market, and the second has to do with changes in the local economy. In an effort to determine an appropriate response to these changes, Mr. Navallez and his team has begun analyzing these changes that are affecting his business. Mr. Navallez does have a few ideas on how to move forward but will have to research more on the correct capital budgeting that is best for his organization. Capital budgeting is defined as the process of choosing the organizations long term capital investment strategy, this often consist of things like land, property and equipment (Emery, Finnerty, & Stowe, 2007). Alternatives With the changes the Mr. Navallez and his team are tasked to deal with there are some alternatives that they must decide on to adjust to the new market. They must first decide if they are going to maintain their same type of operation without changing to the industry, become an agent for the new company, or cross their organization over to becoming high tech like the new competition. Capital budgeting will be applied to the options discussed to choose the best one. Through capital budgeting the risk associated with each alternative will also be...

Words: 1123 - Pages: 5

Premium Essay

Guillermo

...Guillermo's Furniture Store Introduction Guillermo’s Furniture Store’s marketplace is changing. Guillermo must make organizational changes to keep up with the current marketplace. The choices presented to Guillermo each have their advantages and disadvantages. This paper will explain the different business strategies and the projected outcomes of each strategy. Without proper analysis, Guillermo could make a business decision that does not suit the company’s operational goals and objectives. Guillermo can determine the best course of action through capital budgeting techniques. Through calculating the net present value (NPV), the internal rate of return (IRR), and the weighted average cost of capital (WACC) Guillermo can determine the best course of action that will have the best profitability outcomes. Guillermo could decide to maintain doing business without making any changes to the structure of the company. If he chose to stay on his current path, furniture sales could decrease because of the competitions ability to sell quality furniture at discounted prices. Continuing with business as usual, Guillermo will miss opportunities for growth. Currently Guillermo has a net income before taxes of forty-four thousand dollars. If Guillermo continues to operate the same way he will be facing many challenges going forward. Some challenges he will be facing consists of; increased competition, residents of Sonora have better job opportunities with increased wages (University...

Words: 452 - Pages: 2

Premium Essay

Chapter 1,2,3 – Answers to Assigned End of the Chapter Questions

...multi-period decision is measured by discounting the expected future economic profits (which is the excess of earnings or cash flow for each period over that which could have been earned on investments of similar risk for that period) back to present. 1-4. Present value is either a single future amount discounted back to present or the sum of a number of future amounts discounted back to present. Net present value is the sum of the present value and the initial outlay or outlays necessary to produce the future amount(s). 1-5. A capital investment is an outlay that is expected to result in benefits extending more than one year into the future. Capital budgeting is the process of selecting capital investments. 1-6. Steps in capital budgeting process: - Establish Goals - Develop Strategy - Search for Investment Opportunities - Evaluate Investment Opportunities - Select Investments - Implement and Monitor - Post audit 1-7. The main question is whether the future benefits are worth the present cost. Thus, it is necessary to consider the amount of costs and benefits,...

Words: 1219 - Pages: 5

Premium Essay

Capital Budgeting

...CHAPTER ONE Introduction Understanding and being able to use capital budgeting techniques and investment appraisal tools is usually a standard requirement for most business degrees. In addition learning such methods will also give one an advantage in a real business situation, in which there is the consideration of significant capital expenditure project. Capital budgeting assists management decisions making on the process of ensuring growth of the organization. The techniques are divided into two types: one, Traditional (non-discounting) that includes pay back method, accounting rate of return (ARR). Two, discounting cash flow that includes net present value (NPV), internal rate of return (IRR) Profitability Index (PI). Before an investment appraisal is conducted, there are a number of points to keep in mind. Whilst the tool presented will give an evaluation of the worth of a project, one should consider that the answer is only a guide. In short, the results of an investment appraisal should be considered in conjunction with both common sense and other qualitative factors such as a business’s overall strategy. Secondly, before an investment appraisal is conducted, one should consider whether or not the project is mutually exclusive. Where a project is mutually exclusive, then only the best project should be selected. Where on the other hand, projects are independent; one may select all projects which give the appropriate return. 1.1 Background of the study Corporate finance...

Words: 7901 - Pages: 32

Premium Essay

New Heritage

...Christopher D. Huff 6/21/2016 Case 2 MBA 6368 New Heritage Doll Company Capital Budgeting Introduction The Vice President of the New Heritage Doll Company’s product division, Emily Harris, has decided to present two capital budget improvement proposals to the company’s capital budgeting committee in October. The purpose of the proposals is to provide the capital budgeting committee with a sound option that will make a positive impact on future company growth without hindering current operations and maneuverability. The purpose of this case is to decide which proposal is the most qualified proposal based on financial metrics and company goals. New Heritage Doll History and Profits Before evaluating each proposal it is important to understand the company New Heritage Doll and the toy industry itself so that we can make better assumptions for the case. New Heritage was established in 1985 by Ingrid Beckwith. Her vision for the company and those that purchased her products was simply to foster and grow a child’s ability to positively view their image and increase creativity. Her doll’s had an immediate impact on the industry which increased demand for New Heritage Doll products. Currently, the company receives operating profit from three divisions. The production division, the most asset heavy division, designs and produces dolls and doll accessories. In 2009, operation profit for the product division was 7.7 million. The retail division offers products through websites...

Words: 1241 - Pages: 5

Premium Essay

Busn278 Course Project

...Analysis | | | | 4.3 | Rate of Return Calculations | | | | 4.4 | Payback Period Calculations | | 5.0 | Pro Forma Financial Statements | | | | | | 5.1 | Pro Forma Income Statement | | | | 5.2 | Pro-Forma Cash flow Statement | | | | 5.3 | Pro-Forma Balance Sheets | | 6.0 | Works Cited | | | | 7.0 | Appendices | | | | | | 7.1 | Appendix 1: [description] | | | | 7.2 | Appendix 2: [description] etc | | * 1.0 Executive Summary 1.0 Executive Summary * Papa Geo’s an Italian restaurant will be a start up business which will be located in Orland, Florida. The restaurant will have strong emphasis on quality and will work on low cost strategy which will help in attracting more and more consumers across the place. Being located in the heart of the city and its value pricing strategy, the company will be able to attract the large junk of consumers. The company will not compete with the established international brands but will make its own image with the quality and value pricing and will mainly target middle to lower middle class families in Orlando, Florida. The target population is expected to grow at 6% per annum. Being an Italian restaurant, the restaurant will be working on a new concept of buffet style, serving different dishes like salads, pizza, different pastas with three to four kinds of different sauces, soup, desserts and...

Words: 3910 - Pages: 16

Premium Essay

Capital Budgetting

...criteria you deem appropriate. There is more detailed information provided in the case study and you also can: 1. Review the Prepare tab where you’ll learn about New Heritage and its corporate strategy; 2. Navigate the Analyze tab to view detailed financial reports at the divisional and company levels. Here you can also evaluate projections for each of the available projects; 3. Proceed to Decide tab to submit your final project decisions for that year; 4. The simulation advances to the next year and presents the financial results of your investments. The Case Study is a real-world case study, which will help you to know what’s going on in the real corporate world. Curtin University has bought the copyright from Harvard Business School and paid almost half of the Finance Simulation: Capital Budgeting, New Heritage Doll Simulation for each student. The simulation is a useful software and tool containing all information and calculations in order to help the CEO to make capital budgeting decisions. Curtin students only need to pay $7.50USD to use this simulation software. Please submit your simulation online and written document electronically through Turnitin on the Blackboard (Assessment/Case Study/Case Study View/Complete). You can play the capital budgeting simulation as many times as you want before the submission. For example, if...

Words: 514 - Pages: 3

Premium Essay

Midland Energy Recourses

...2008. R&M is Midland’s largest division, measured my revenue. The relatively small margin was consistent with a long-term trend in the industry, and Midland projected capital spending in R&M would remain stable. Petrochemicals is Midland’s smallest but most promising division. Capital spending in petrochemicals was expected to grow in the near term. Much of the new investment would be undertaken my joint ventures outside US. The primary goals of Midland’s financial strategy are to fund substantial overseas growth, invest in value-creating projects, optimize capital structure, and repurchase undervalued shares. To achieve these goals, Midland must calculate an appropriate cost of capital that will allow reasonable valuations of their strategies. Janet Mortensen, the senior vice president of project finance for Midland Energy Resources, has been asked to calculate the weighted average cost of capital (WACC) for the company as a whole, as well as each of its three divisions as part of the annual budgeting process. Cost of Capital, WACC, CAPM Cost of capital is the rate of return that the firm must earn on investment so that the market value of the company’s equity share does not fall. The correct discount rate depends on the riskiness of...

Words: 1689 - Pages: 7

Free Essay

New Heritage Doll Compant

...4212 SEPTEMBER 15, 2010 TIMOTHY LUEHRMAN HEIDE ABELLI New Heritage Doll Company: Capital Budgeting In mid-September of 2010, Emily Harris, vice president of New Heritage Doll Company’s production division, was weighing project proposals for the company’s upcoming capital budgeting meetings in October. Two proposals stood out based on their potential to strengthen the division’s innovative product lines and drive future growth. However, due to constraints on financial and managerial resources, Harris knew it was possible that the firm’s capital budgeting committee would decline to approve both projects. She also knew that New Heritage’s licensing and retail divisions would promote compelling projects of their own. Consequently, Harris had to be prepared to recommend one of her projects over the other. The Doll Industry Revenues in the U.S. toy and game industry totaled $42 billion in 2008 and were projected to increase by 4.6% per year to $52.5 billion by 2013. The market was divided into two broad segments: video games (48%) and traditional toys and games (52%). The second segment was further divided into infant/preschool toys (14.5%), dolls (14.1%), outdoor & sports toys (12.3%), and other toys & games (59.1%) including arts and crafts, plush toys, action figures, vehicles, and youth electronics. The U.S. market for toys and games was dominated by large global enterprises that enjoyed economies of scale in design, production, and distribution. Revenues...

Words: 4264 - Pages: 18