Corporate resource allocation : financial, strategic, and organizational perspectives / Cyril Tomkins.

Format:

Book

Author/Creator:

Tomkins, Cyril.

Language:

English

Subjects (All):

Corporations--Finance.

Corporations.

Cost effectiveness.

Investment analysis.

Strategic planning.

Physical Description:

xix, 263 pages : illustrations ; 24 cm

Place of Publication:

Oxford, UK ; Cambridge, Mass., USA : B. Blackwell, 1991.

Summary:

In Corporate Resource Allocation Cyril Tomkins provides both practitioners and students of accounting and finance with a powerful new framework for understanding effective corporate resource allocation decisions.

The book is a significant attempt to draw together the key strands to create a multi-disciplinary model capable of describing how a range of business disciplines must come together in this crucial area.

Corporate resource allocation decisions depend on financial, accounting and strategic criteria which the author has welded together by critically analysing each disciplinary perspective and reviewing the relevant literature. The issues are clearly dealt with and range from the inconsistencies between financial theory and financial modelling, to how accounting performance measures influence investment behaviour. The author also demonstrates how corporate managers must address a range of issues concerned with diversification and risk even when trying just to maximise shareholder wealth. By drawing organizational behaviour into the strategic view of decision making, the implications for both finance and accounting can then be examined.

All those interested in corporate resource allocation both from a theoretical and a practical viewpoint will find that the book provides a new and stimulating approach which synthesises techniques with a strategic overview. The author has incorporated computer-based exercises and disks are available from the publisher for further interactive training.

Contents:

1 Investment Appraisal: A Theory of Finance Perspective 1

Measuring returns from an investment 1

Assessing the relationship between risk and return for one-period investment 3

Estimating a company's beta in practice 6

How good is the CAPM at explaining investment-market behaviour? 9

Separating business risk from financial risk 13

Required rates of return from divisions and projects for one-period investments 15

Multi-period discounting in the appraisal of projects 18

Other complications: cash flows after corporate taxes, adjusting the required return for the tax benefits from debt finance, capital allowances, subsidized loans and inflation 20

Extra complications with foreign investment 24

A brief summary of resource allocation from the shareholder's view based on the CAPM 28

2 Financial Modelling in Project Appraisal and its Relationship to the Theory of Corporate Finance 35

Simple 'what if' and goal-seeking models to appraise individual projects 36

Decision trees applied to individual projects 40

Monte Carlo analysis for individual projects 45

An evaluation of Monte Carlo analysis in investment analysis 52

Individual projects in the context of the corporate portfolio 54

3 Financial Investment Appraisal in Practice and Influential Accounting Procedures 73

Investment appraisal in management accounting practice and the theory of finance 74

The influence of divisional-performance measurement on resource allocation 76

Cost-behaviour analysis, product-costing and resource allocation 82

4 Strategic Analysis and Corporate Investment: An Economic and Marketing Emphasis 89

Strategic portfolio analysis 91

Analysing industry attractiveness and competitive strengths and devising competitive strategies 100

An interim evaluation of the portfolio-grid approach 105

5 Towards Integrating Accounting into Strategic Analysis 119

Accounting for portfolio analysis 121

Contributing to market-attractiveness and competitive-strengths analyses 122

Testing for generic strategies 123

Does widespread use of ROI lead to poor corporate strategies? 125

Accounting and cost-leadership strategies 129

Distinguishing between cost reduction and cost measurement 138

Distinguishing between price recovery and productivity 142

Accounting for differentiated-product strategies 146

The impact of new manufacturing methods 149

6 Towards Integrating the Theory of Finance and Strategic Analysis 159

The relevance of discounted cash flow calculations 159

Difficulties in measuring net cash benefits from investment projects 163

Can more financial rigour be incorporated into portfoliogrid analysis? 167

The cost of capital in strategic analysis 173

Diversification and capital-rationing 177

Market valuation and strategic analysis 179

7 Organizational Behaviour and Strategic Investment Decisions 185

Multi-disciplinary perspectives of organizational life 185

Organizational structures and roles 186

Beyond simple forms of rational analysis 188

Discovering and changing widely held schemas 201

Discussion questions and exercises 209

8 Integrating Corporate Strategy and Organizational Approaches to Resource Allocation 211

Towards an integration of corporate strategy and organizational literature 211

A digression to review the problem of interdependencies in portfolio grids given their organizational interpretation 220

9 Financial Control in Pluralistic Organizations 227

Thoughts on risk analysis in pluralistic organizations 228

How corporate managers must be concerned with entity risk when maximizing shareholder wealth

despite the CAPM! 234

The location of frame-breaking responsibility in the organization and its relevance to financial control: ROI revisited, yet again! 237

The accountant as schema-reinforcer for SBUs 242

The perpetually innovating company: does this invalidate the notion of set schemas? 247

The accountant as a change-manager 248.

Notes:

Includes bibliographical references and index.

ISBN:

0631145281

0631178228

OCLC:

21561576