Strategic Planning - ANS Process of defining an organization's strategy or direction & allocating resources to pursue this strategy.
Hambrick & Fredrickson Strategy Diamond (ESAVD) - ANS - Economic Logic: how returns will be obtained
- Staging: speed and sequence of moves
- Ar...
Strategic Planning - ANS Process of defining an organization's strategy or direction &
allocating resources to pursue this strategy.
Hambrick & Fredrickson Strategy Diamond (ESAVD) - ANS - Economic Logic: how returns
will be obtained
- Staging: speed and sequence of moves
- Arenas: where we will be active
- Vehicles: how we will get there
- Differentiators: how we will WIN
Capital Budgeting (EIR) (CIB) - ANS A budget for capital items:
- Equipment
- Infrastructure
- Renovation
All involved in the Capital Improvement Budget (CIB) which is distinct from the maintenance and
operating budget.
Benefits of Capital Budgeting (SAP) - ANS - Separates high-cost 'one-time' expenditures
from operating budget
- Allows planned growth and spending
- Provides focus
NFP vs. Corporations - ANS - No dividends in NFP. Goal is to provide best services to
stakeholder groups.
- Yes dividends in corporation. Goal is to maximize value for shareholders.
Capital Budget Process (simplified) (ILCIC) - ANS 1. Inventory/ audit capital assets
regularly
(What do we have?)
2. Link to strategic plan
(How does this mesh with strategy?)
3. Conduct a needs analysis
, (What do we need?)
4. Identify gaps... replace or repair
(What shape is it in?)
5. Conduct a cost analysis
(What are we looking at $?)
Capital Investments - Projects may be: (ID) - ANS Independent - acceptance of one is
unaffected by acceptance of another
Dependent - acceptance of one can be adversely impacted by the acceptance of another
Intro to decision-making: Choosing optimal capital budget
(finance-too many-internal) - ANS - Finance theory says: accept ALL projects with positive
NPV
- Too many projects could be challenging to manage
- If not enough internal cash to fund all projects: Capital rationing (increasing cost of capital).
Future Value vs. Present Value - ANS Future Value: the value of a present sum of money
at a future date.
Present Value: the value TODAY of a future amount.
CENTRAL to capital budgeting is finding NPV
Steps to assess ROI (DPE) - ANS 1. Determine initial cash outlay
2. Project future cash flows (be conservative)
3. Evaluate future cash flows (Payback, NPV)
Payback Method Considerations (TLT) - ANS - Main consideration is TIME it takes to pay
back investment.
- Doesn't specifically focus on LIFETIME utility of project.
- Doesn't consider time value of money.
Net Present Value (NPV) Method (TTH) - ANS - Takes into account time value of money.
- Provides an answer in today's $
- Finds the 'hurdle rate'
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller DocLaura. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.29. You're not tied to anything after your purchase.
