Capitol Budgeting Long Term Financing Assignment

Capitol Budgeting Long Term Financing - Assignment Example Capital assets receive attention because they commit a firm for long term. These capital assets are commitment of over a year and sometimes for decades for instance, real estate. Economically, the resources being scarce and competitive in nature, there would be wrong allocation of such resources at the wrong time or on a non rewording asset. Assets acquisition analysis According to (Baker, & Powell, 2005) any company will invest finance for the sake of gaining a return which is useful for four focal reasons: 1. To recompense the shareholders or owners of the enterprise for staking their money and by sacrificing their current purchasing power for the sake of current and future cash flow 2. To reward lenders by paying them regular return on their money borrowed in the form of interest and principal repayment as and when it falls due. 3. To be able to plough back retain part of their earnings for the purpose which facilitates not only the companies’ short term growth and long ter m growth but also has the implication of increasing the size of the company in terms of sales, in assets as well as shareholders wealth. 4. To increase the share prices and thus the credibility and goodwill of the company and its capability to raise further finance. Such return is necessary to keep the company’s operations moving straightforwardly and efficiently thus allowing the above objective to be accomplished. A financial manager and decision makers must present investment policies which will be concerned with how efficiently the company’s funds are invested because it is from such investment that the company will survive. The investments are important because: They influence company’s size, Influence growth Influence company’s risks In addition, to this investment decision making process which is also known as capital budgeting, involves the decision to invest the company’s current funds in viable ventures whose returns will be realized for long term periods in future. Capital budgeting as financial planning is characterized by the following: a. Decisions of this nature are long term i.e. extending beyond one year in which case they are also expected to generate returns of long term in nature. b. Investment is usually heavy (heavy capital injection) and as such has to be properly planned. c. These decisions are irreversible and any mistake may cause the company heavy losses. Importance of Investment Decisions 1) Such decisions are importance because they will influence the company’s size (fixed assets, sales, and retained earnings). 2) They increase the value of the company’s shares and thus its credibility. 3) The fact that they are irreversible means that they have to be made carefully to avoid any mistake which can lead to the failure of such investment. 4) Due to heavy capital outlay, more attention is required to avoid loss of huge sums of money which in the extreme may lead to the closure of such a company. However, these decisions are influenced by: I. Political factors – Under conditions of political uncertainty, such decisions cannot be made as it will entail an element of risk of failure of such investment. Thus political certainty has to be analyzed before such decisions are made, such factors must be taken into account such that the company forecasts the inflows and outflows within given. Limitations such as the

Feasibility study Research Paper Example | Topics and Well Written Essays - 2500 words

Feasibility study - Research Paper Example Protein is in the spotlight today because it is not only healthy, but it is also truly the essence of life. The Atkins diet hasn’t hurt the business any either but rather it has enlightened the mankind about importance of protein rich diet and ho it is healthy and valuable to the human beings. Many consumers have found cheese great for their diets and it has helped spur growth in the single-serve cheeses that are purchased in the grocery stores as an easy means of a quick snack readily available off the corner. Convenient foods are an ever growing food segment too which mostly contain cheese. Peezanoâ„ ¢ seeks to leverage and capitalize on the numerous competitive advantages its patents are able to provide in the food service (bulk cheese) and packaged cheese goods markets. In addition, the Company has identified a line of proprietary, delicious tasting, health conscious and convenient meal solutions. Peezano will initially target the domestic mozzarella cheese market as a means to leverage its advantage over the mozzarella cheese. This market represents well over 3 billion pounds of cheese produced and consumed each year which represents over pounds 4 billion in sales. The Company’s Peezanoâ„ ¢ cheese, will be marketed as a Premium level cheese with more flavor, fewer calories, less cholesterol, more tender and with a longer shelf life. Phase 1 : Product/Service Feasibility Analysis Cheese manufacturing technology developed by Peezanoâ„ ¢ allows it to produce a new kind of cheese that is better tasting than mozzarella and yet at a 30% lower cost. In 2010, the British consumers have consumed more than 2.6 billion pounds of cheese (www. .dairyco.org.uk). According to the most recent statistics, â€Å"Latest  Kantar Worldpanel  data shows that cheese volume sales have increased by 3.2% (12,649 tonnes) to 407,642 tonnes in the 52 weeks ending 26 December 2010, when compared to the same period in 2009. Spend has also increased compared t o the previous year, up by 3.6% (?84.8m) to ?2.5bn for the 52 weeks ending 26 December 2010.   The total average price stood at ?6.03/kg, 0.4% (?0.02/kg) more than the same period last year.† (www.dairyco.org.uk). Cheese is a highly nutritious and palatable food which contains protein, essential minerals, vitamins, and other nutrients found in the milk base. â€Å"Almost all households in Britain purchase cheese with the average household buying 1.5 times per week. The typical basket size was up by 4.7% over the last year with the average price paid of ?2.70 per kilogram giving a total spend per person of ?95.68.†Ã¢â‚¬  (www.flex-news-food.com) Today, British manufactures are using more than one-third of their milk production to produce cheese for the country. Concept and usability Testing:   The new technology of cheese manufacturing and the cheese quality produced was subjected to extensive consumer taste research. The concept was