Accounting for Managers: Interpreting accounting information for decision-making

ACCOUNTING DECISIONS 177 Table 11.12 Quality Bank – transaction volumes by branch Branch A Branch B Branch C Total branch HO Tot ...

178 ACCOUNTING FOR MANAGERS the profitability of different business segments (e.g. new accounts, lending, ATM transactions etc.) ...

ACCOUNTING DECISIONS 179 Drury, C. and Tayles, M. (2000).Cost System Design and Profitability Analysis in UK Companies, London: ...

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12 Strategic Investment Decisions We introduced strategy in Chapter 2 to explain its link with achieving shareholder value. In t ...

182 ACCOUNTING FOR MANAGERS As we saw in Chapter 8, Porter (1980) developed his ‘five forces’ model for analysing an industry. T ...

STRATEGIC INVESTMENT DECISIONS 183 žassess non-financial aspects of each alternative; ždecide to proceed; ždetermine an implemen ...

184 ACCOUNTING FOR MANAGERS Table 12.1 Cash flows for investment alternatives Year Project 1 Project 2 Project 3 0 initial inves ...

STRATEGIC INVESTMENT DECISIONS 185 Table 12.3 ARR/ROI for Project 1 Year Cash flow Depreciation Profit Investment ROI 1 25,000 2 ...

186 ACCOUNTING FOR MANAGERS Project 3 in particular has substantial fluctuations in ROI from year to year. Using this method, Pr ...

STRATEGIC INVESTMENT DECISIONS 187 net present value (NPV)=present value of future cash flows−initial capital investment The dis ...

188 ACCOUNTING FOR MANAGERS Table 12.7 NPV for Project 2 Year Project 2 cash flows Discount factor (10%) Present value of cash f ...

STRATEGIC INVESTMENT DECISIONS 189 This is a more informative presentation of the comparison because it presents the cash flows ...

190 ACCOUNTING FOR MANAGERS Year Inflow Outflow 1 75,000 30,000 2 90,000 40,000 3 100,000 45,000 4 100,000 50,000 5 75,000 40,00 ...

STRATEGIC INVESTMENT DECISIONS 191 Table 12.9 NPV for Goliath Co. AB Year 0 C Year 1 D Year 2 E Year 3 F Year 4 G Year 5 Cash fl ...

192 ACCOUNTING FOR MANAGERS than a decision tool because it was driven by how the investment proposal was framed. Shank argued t ...

STRATEGIC INVESTMENT DECISIONS 193 Appendix: Present value factors Table 12.10 gives the present value of a single payment recei ...

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13 Performance Evaluation of Business Units This chapter describes the methods by which the performance of divisions and their m ...

196 ACCOUNTING FOR MANAGERS 1 To guide divisional managers in making decisions. 2 To guide top management in making decisions. 3 ...