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Strategic Accounting Issues in Multinational Companies
Transcript of Strategic Accounting Issues in Multinational Companies
in Multinational Companies Strategic Planning Strategy Formulation Environmental
& Threats Fit Internal Competencies with External Opportunities Firm's
Strategies Strengths & Weaknesses Internal
Analysis Technique Payback Period
IRR Number of years to
recover the initial investment
Rate of average annual net income to
the initial investment or average investment
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
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
Structure Strategy Performance Delegation
Cultural control Raw Materials
Availability New Technologies Productivity
Levels Demographics Inflation
Rates National Economic
and Policies Administrative
Controls Health and Safety
Expectations financial measures
non-financial measures Ranking Evaluation Criteria by MNCs Criterion Profit Margin
Return on Sales
Return on Assets
Return on Investment
Residual Income 1
13 British Canadian German Japanese Thank you!