A. Write an annotated bibliography of each article.
Capital Budgeting
Article 1: Investment Decisions: How it influence Capital Budgeting Practices.
Ghumro, I. A., Lashari, A. A., Bhatti, I., & Abro, M.-R. (2019). Investment Decisions: How it
influence Capital Budgeting Practices. Journal of Managerial Sciences, 13(2), 84–94.
This article is an analysis of investments decisions in relation to capital budgeting practices in
the manufacturing sector of Pakistan. It emphasizes the difference between financial and nonfinancial resources and how are utilized in the benefit of decision-making process into the
organization’s goals. During the study and analysis, it was found that large firms use NPV and
IRR as the most common technique used by managers in capital decisions while the small and
medium-sized enterprises use the non-discount method due to their limited capital.
Article 2: The Capital Budgeting of Corporate Social Responsibility
ArticMaria-Teresa Bosch-Badia, Joan Montllor-Serrats, & Maria-Antonia Tarrazon-Rodon.
(2020). The Capital Budgeting of Corporate Social Responsibility. Sustainability, 12(3542),
3542. https://doi.org/10.3390/su12093542le
This article is an evaluation of how corporate social responsibility investments projects can help
mitigate negative externalities generated by corporate investments. CSR projects goal is to
improve corporate responsibility instead of maximizing the focus only on the creation of
financial value. The analysis mentions that CSR need specific strategic planning and capital
budgeting analysis that are focused on financial sustainability of the corporation, economic
evaluation on the impact on corporate stakeholders and efficacy in natural or social units that
will mitigate negative externalities.
Article 3: Financial analysis for custom hire business of mechanical rice transplanter in
Bangladesh
Surajit Sarkar, Md. Samiul Basir, Muhammad Ashik E Rabbani, Md. Mosharraf Hossain, & Md.
Monjurul Alam. (2020). Financial analysis for custom hire business of mechanical rice
transplanter in Bangladesh. Fundamental and Applied Agriculture, 5(1), 124–
132. https://doi.org/10.5455/faa.79466
This is a study was performed to analyze the financial parameters of a mechanical rice
transplanter in Bangladesh. Different factors such as, two types of mechanical rice transplanters,
different cropping seasons, field capacity, NPV and IRR were evaluated as part of the analysis in
this experiment. It was concluded that, rice transplanter was the more profitable option and that
is more cost effective compared to the manual system process. This alternative is a great
opportunity for custom hire business and entrepreneurship development.
Article 4: Analysis of some economic-financial ratios to analyze the financial crisis in fivestar hotels in Barcelona and Madrid
This article explains how the tourist model in Spain changed while the financial crisis and also
how a luxury single hotel in the same hotel chain implemented a good strategic planning in order
to improve their financial ratios. During this study it was found that it not worth for hotel chains
to have more than one luxury hotel in the same city since at least one will show financial losses.
Moreover, is important to have a good budget and planning strategy in order to accomplish
maximum efficiency.
Laia Pie, Isaac Bonillo, Judit Barcelo, & Laura Fabregat-Aibar. (2019). Analysis of some
economic-financial ratios to analyse the financial crisis in five-star hotels in Barcelona and
Madrid. Intangible Capital, 15(2), 99–113. https://doi.org/10.3926/ic.1361
B. Based on the articles you reviewed, discuss what you learned
After reading both articles on capital budgeting I learned that large and medium size firms have
their own common preferred methods. However, it depends on each company and their
management team on which method will better fit their business needs. Moreover, I learned that
non- discount method of capital budgeting does not consider the time value of money.
On the other hand, there are CSR projects that their main focus is to create sustainability and not
just financial value. These projects provide an integrative perspective of how corporations can
accomplish financial sustainability and at the same time accomplish their organizational goals.
In regard to financial analysis, I learned that there are many factors that can be considered while
searching for new business opportunities and accomplish the most cost-effective method.
Financial analysis is an essential tool for future business decisions and can also help investors to
make the most convenient investment decision. In addition, business owners must focus not only
on financial analysis but also count with a strategic and budget strategy, since this will allow
them to have a better control of the business performance.
C. In addition, discuss how a manager would use the concepts in the articles you reviewed
in managerial decisions.
Capital budgeting is an essential concept used by managers since this will allow them to provide
a forecast of all revenues and expenditures of the company’s future outcome and performance.
Moreover, capital budgeting help management in the decision-making process around large
investments, risk, cash flow and business strategy.
Financial analysis is another essential tool not only for managers but also for business owners.
This method will allow management to develop efficient strategies and identify their areas of
growth, strengths and weakness as well as the company performance and enhance the
organization’s decision-making process.
References
Ghumro, I. A., Lashari, A. A., Bhatti, I., & Abro, M.-R. (2019). Investment Decisions: How it
influence Capital Budgeting Practices. Journal of Managerial Sciences, 13(2), 84–94.
ArticMaria-Teresa Bosch-Badia, Joan Montllor-Serrats, & Maria-Antonia Tarrazon-Rodon.
(2020). The Capital Budgeting of Corporate Social Responsibility. Sustainability,
12(3542), 3542. https://doi.org/10.3390/su12093542le
Surajit Sarkar, Md. Samiul Basir, Muhammad Ashik E Rabbani, Md. Mosharraf Hossain, & Md.
Monjurul Alam. (2020). Financial analysis for custom hire business of mechanical rice
transplanter in Bangladesh. Fundamental and Applied Agriculture, 5(1), 124–
132. https://doi.org/10.5455/faa.79466
Laia Pie, Isaac Bonillo, Judit Barcelo, & Laura Fabregat-Aibar. (2019). Analysis of some
economic-financial ratios to analyse the financial crisis in five-star hotels in Barcelona
and Madrid. Intangible Capital, 15(2), 99–113. https://doi.org/10.3926/ic.1361
Kengatharan, L., (2016). Capital budgeting theory and practice: a review and agenda for
future research. Applied Economics and Finance, 3(2), 15-38.
The author discusses the capital budgeting theory and practice. Capital budgeting basic principle
advocates in employing DCF strategies and not DFC strategies to create capital budgeting
decision. On the other hand, all a lot of each of the organizations in developed and acquiring
places prepared to utilize complex capital budgeting strategies down with many capital
budgeting tools for including possibility (i.e., awareness analysis, options) and complex reduced
rate. Capital budgeting will be essential and made use of almost everywhere since an instrument
for arranging, manage, and portion regarding turn sources among rivaling demands. Capital
budgeting is a vital element in financial arranging and making decisions considering capital
budgeting tools potential customers superior making decisions and be able to make a case for the
choice of distinct capital investments among rivaling choices.
Lunkes, R. J., Ripoll-Feliu, V., Giner-Fillol, A., & da Rosa, F. S. (2015). Capital budgeting
practices: A comparative study between a port company in Brazil and Spain. Journal of
Public Administration and Policy Research, 7(3), 39-49.
The author states that capital budgeting is particles making setting up decisions for long-term
investments. We have an amount of technique employed to review capital budgeting
assignments, i.e., payback, bookkeeping pace associated with the return, present internet value,
and interior pace of return, and earnings index. Previously 60 decades NPV and IRR emerged
coming from obscurity to become among the overwhelming choices for a quantitative
measurement associated with purchases' attraction throughout modern day businesses.
Nuhu, M. (2014). Role of ratio analysis in business decisions: A case study NBC Maiduguri
Plant. Journal of Educational and Social Research, 4(5), 105.
According to Nuhu (2018), financial statements carry lots of financial Information that are
hidden in the figures. The figures in financial statements become more useful when they are
related to each other or some other relevant financial data. Therefore, users of financial
information go a further step to establish relationships (or ratios) among selected data in financial
statements. Accounting ratio is a proportion or fraction or percentage expressing the relationship
between one item in a set of financial statements and another item in the financial statements.
Accounting ratios are the most powerful of all tools used in analyzed and interpreting financial
statements. Therefore, ratio analysis involves taking stats of number (or items) out of financial
statements and forming ratios with them, to enhance informed judgments and decisions.
Ravinder, D. D., & Anitha, M. (2013). Financial Analysis – A Study. Journal of Economics
and Finance, 2(3), 10-22.
According to Ravinder and Anitha, (2013), financial analysis can be the whole process of
determining the financial muscle and weak spots in the corporation through properly building
marriage amongst items of financial statements. The financial statement can be a great series of
info in line with the plausible and conceptual framework — regular sales procedure. Its reason
can be to convey a comprehension of several financial aspects of a company firm. It may well
exhibit a situation from a short time of one's since the occasion, since regarding money
statement. Financial effectiveness is the term for the action of undertaking financial activity. In a
much wider perception, financial effectiveness is the education to which financial objectivities
remaining and continues to be accomplished. It is the whole process of computing the final
results of the firm's plans and operations inside economical terms. It is used to assess
corporations over everything financial well-being over a supplied period.
I learned about the capital budgeting and financial analysis based on the review of the article.
Financial analysis is the whole process of analyzing enterprises, assignments, finances, and
finance-related businesses to figure out his or her functionality and suitability. Commonly,
financial analysis is used to examine whether a great entity is dependable, synthetic cleaning
agent, fruit juice, and successful ample to cause a financial investment.
As a manager could also use these concepts in the managerial decision. The capital budgeting is
crucial in accepting or rejecting the project. Capital budgeting is critical because celebrate
obligation and measurability. Any company this looks for to pay the resources in a project,
without having comprehension the health risks and dividends involved, would be held while
irresponsible by the proprietors or perhaps shareholders. Additionally, if an organization has got
no chance regarding gauging the strength of the investment decisions, it is that the business
enterprise could havea minor probability of moving into the cut-throat market.
References
Kengatharan, L. (2016). Capital budgeting theory and practice: a review and agenda for future
research. Applied Economics and Finance, 3(2), 15-38.
Lunkes, R. J., Ripoll-Feliu, V., Giner-Fillol, A., & Rosa, F. S. (2015). Capital budgeting
practices: A comparative study between a port company in Brazil and in Spain. Journal
of Public Administration and Policy Research, 7(3), 39-49.
Nuhu, M. (2014). Role of ratio analysis in business decisions: A case study NBC Maiduguri
Plant. Journal of Educational and Social Research, 4(5), 105.
Ravinder, D. D., & Anitha, M. (2013). Financial Analysis – A Study. Journal of Economics and
Finance, 2(3), 10-22.
Capital Budgeting and Financial Analysis
The term capital budgeting consists of two words like capital and budgeting. The word capital in
this process refers to the expenditures of the company to buy some equipment, assets etc. There
are some objectives of the capital budgeting process which are to be kept in the minds of
managers of every company in order to gain profit. The first objective is selecting proper
profitable project among many offered profitable projects based on the available capital. The
other objective is to control the investment of capital. Management of the capital expenditure is
very important in this process of capital budgeting. The third objective of this process is to find
the appropriate source of fund. There should always be a balance between the amount of
borrowing and the return of the investment (Selvanayaki, 2016).
Financial analysis is a process which analyses the performance of the company using its financial
data and suggests some tips for the growth of the company. This process is carried out by
analysing the financial data using the spreadsheet. There are many types of financial analysis.
The first type is a vertical analysis which looks at all the components of the income and divides
them to express them in the percentage. This type is used to compare the company with other
competitive companies. The second type is horizontal analysis takes the financial data of the
company from many years and compares the data with the data of every year to check the
percentage of the financial growth. The third type is leverage analysis which is used to evaluate
the performance of the company.
Capital budgeting helps in different ways for the growth of the company. There are many
methods in this process of capital budgeting. The first method is to pay back period method. This
is the period between the assumptions of gaining the profits to recover from the first investment.
This method is based on the capacity of the company to gain profits. The second method is the
accounting rate of return method in which the percentage of the earnings from an investment
project is expressed (Simkins, 2011).
Financial analysis process helps the managers of the company to evaluate the performance of the
company. This financial analysis process involves some evaluations like cost volume profit
analysis which helps the managers of the company to know the accurate costs of the products,
the volume of the manufactured products and the profit which can be gained after selling the
manufactured products. The other evaluation analysis is contribution margin which allows the
managers to calculate the percentage of cash that was remained after the
investment (Srithongrung, 2018).
References
Selvanayaki, S., Sivakumar, S. D., Rohini, A., & Mani, K. (2016). Financial Management
Practices and Profitability of Modern Rice Milling Firms in Kangayam Cluster, Tamil
Nadu. Agricultural Economics Research Review, 29(2), 297–
306. https://doi.org/10.5958/0974-0279.2016.00057.4
Simkins, B. J. (2011). Total Risk Evaluation for Capital Budgeting. Journal of Applied Finance,
21(1), 30–38. Retrieved
from http://search.ebscohost.com/login.aspx?direct=true&AuthType=sso&db=buh&AN=
60804487
Srithongrung, A. (2018). Capital Budgeting and Management Practices: Smoothing Out Rough
Spots in Government Outlays. Public Budgeting & Finance, 38(1), 47–
71. https://doi.org/10.1111/pbaf.12167
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