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Strategic Accounting Issues in Multinational Companies

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by

Marjun Torres

on 7 September 2012

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Transcript of Strategic Accounting Issues in Multinational Companies

Marjun Torres Strategic Accounting Issues
in Multinational Companies Strategic Planning Strategy Formulation Environmental
Analysis Opportunities
& Threats Fit Internal Competencies with External Opportunities Firm's
Strategies Strengths & Weaknesses Internal
Analysis Technique Payback Period


ROI



NPV



IRR Number of years to
recover the initial investment


Rate of average annual net income to
the initial investment or average investment
(Book Value)


Difference between the initial investment and
the present value of subsequent net cash
inflows discounted at a given interest rate.

Discount rate that makes the initial investment
equal to the present value of subsequent
cash inflows Simple to use and understand
Measures liquidity
Appraises risk

Data readily available
Consistent with other financial measures

Consider time value of money
Uses realistic discount rate for reinvestment
Additive for combined projects

Considers time value of money
Easy for comparing projects requiring different amounts of investment Ignores timing and time value of money
Ignores cash flows beyond payback period
Ignores timing and time value of money
Uses accounting numbers rather than cash flows
Not meaningful for comparing projects requiring different amounts of investments
Favors large investments

Assumption on reinvestment rate of return could be unrealistic
Complex to compufe if done manually Definition Advantages Disadvantages Strategy Formulation Management Control Implementation Mechanisms Management
Controls Human
Resource
Management
Culture
Organizational
Structure Strategy Performance Delegation
Goal congruence
Ethnocentric
Polycentric
Geocentric
Global innovator
Integrated player
Local innovator
Implementer
Bureaucratic control
Cultural control Raw Materials
Availability New Technologies Productivity
Improvements Capital
Availability Savings
Rate Subsidiary
Environment Employment
Levels Demographics Inflation
Rates National Economic
Redevelopment
and Policies Administrative
Controls Regulatory
Controls Health and Safety
Regulations Ecological
Concerns Social
Attitudes Social
Norms Social
Expectations financial measures
non-financial measures Ranking Evaluation Criteria by MNCs Criterion Profit Margin
Sales Growth
Cost Reduction
Net Income
Goal Attainment
Budget Adherence
Return on Sales
Return on Assets
Technical Innovation
Return on Investment
Product Innovation
Market Share
Company Standards
Residual Income 1
2,3,4
2,3,4
12
5
2,3,4
6
7,8
7,8
9,10
9,10
11
13
14 1,2
1,2
3,4
5
3,4
6
13
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4 1
2
5
4
8
9
13
14
7
11
6
3
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12 4
1
5
3
2
9
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13
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12
7
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13 British Canadian German Japanese Thank you!
Full transcript