《MPAcc财会专业英语》Chapter25.pdfVIP

Part G Investment appraisal P 523 Chapter 25 (P525-538) Investment decisions Topic list (P525) • 1 Investment • 2 Identification of investment opportunities • 3 The payback period • 4 The return on capital employed method Introduction (P525) Investment appraisal Payback period Return on capital employed Study guide (P526) Section 12- Investment decisions • Exam guide (P526) 1 Investment (P526) • Investment can be divided into capital expenditure and revenue expenditure and can be made in fixed assets or working capital. • capital expenditure • revenue expenditure • 1.1 Fixed asset investment and working capital investment (P526) • (a) Investment in fixed assets • (b) Investment in working capital • 1.2 Investment by the commercial sector (P527) • 1.3 Investment by not-for-profit organisations • (a) few with the intention of earning a financial return • (b) not only focus on lowest present value of cost • (c) cost of capital is determined by the government. 2 Identification of investment opportunities (P527) • Strategic analysis aids the identification of investment opportunities and involves environmental analysis and internal appraisal, which are combined in SWOT analysis. 2.1 Corporate appraisal: SWOT analysis(P528) • Strengths • Weaknesses • Opportunities • Threats • Question (P528) 2.2 Product-market mix (P530) • 2.3 Organic growth or acquisition? (P530) • (a) finance available • (b) existing staff and systems • (c) planned more efficiently • (d) Economies of scale • Acquisitions can be made to enter new product areas, or to expand in existing markets, much more quickly. 3 The payback period (P531) • The payback method of investment appraisal and the ROCE/ARR/ROI methods of investment appraisal are popular appraisal techniques despite their limitations ( of which you should be