Need a discussion and 3 responses for students discussions

A.    Annotated Bibliography

Graham, J., & Harvey, C. (2002). How do CFOs make capital budgeting and capital structure decisions?. Journal of applied corporate finance, 15(1), 8-23.

The chosen article highlights the ways by which Chief Financial Officers utilize the concept of capital budgeting to make major business-related decisions. The paper is credible as the authors are associate professors of finance from Duke University, Faqua School of Business. Anonymous scholars reviewed the article. The main theme presented here is the corporate practice and progress made in the areas of capital budgeting. The authors have conducted a survey consisting of 392 CFOs. The findings suggest that CFOs use the concept of discounted cash flow methods for evaluating a project (Graham & Harvey, 2002). This concept is also taught in business schools. The findings also suggest that capital budgeting provides financial flexibility. The need of corporate houses is to accept such useful concepts of financial theory. It is important to consider the author’s opinions because they have emphasized utilizing the various components of the financial theory.

Harris, M., & Raviv, A. (1996). The capital budgeting process: Incentives and information. The Journal of Finance, 51(4), 1139-1174.

The authors in this article studied the process of capital allocation in business firms. Emphasize has been given upon the process of capital budgeting in fund allocation. The paper is authentic because it is published on Online Wiley Library and the authors are professors of Finance and Business Economics from Graduate School of Business, University of Chicago. The purpose of the study is to identify problems associated with incentives as well as information within businesses (Harris & Raviv, 1996). The implications of imperfections are severe. It can affect capital productivity. The findings also suggest that the budgeting process varies among firms. The budgeting process usually varies because the managers have to consider various division characteristics. These are upcoming investment opportunities and technological advancements required for transferring information at this age. It is necessary to consider the author’s suggestions because information and incentives are vital parts of an organization. Growth depends upon these features.

Sheikhi, A., Ranjbar, A. M., & Oraee, H. (2012). Financial analysis and optimal size and operation for a multicarrier energy system. Energy and buildings, 48, 71-78.

The authors have conducted a study on the operations of the multicarrier energy system and emphasized the need for financial analysis. The paper is original and credible because it is published in the reputed site, ScienceDirect and the authors are faculties of Electrical Engineering from Islamic Azad University, Iran. The main highlights of the paper are the presentation of a comprehensive model for the concerned energy system. The authors have chosen their case study and found the best sizes and operation, models. They have also prepared a financial model for understanding the case study. The paper is written for engineering as well as business and accounting students. It holds relevant data for scholars in both the fields. The study shows that the authors have used functional financial parameters and applied the COMFAR III software for achieving better results (Sheikhi, Ranjbar & Oraee, 2012). The approach of CBA or Cost-Benefit Analysis is useful for maximizing profits.

Obiri, B. D., Bright, G. A., McDonald, M. A., Anglaaere, L. C., & Cobbina, J. (2007). Financial analysis of shaded cocoa in Ghana. Agroforestry systems, 71(2), 139-149.

The authors conducted a study on Ghana’s shaded cocoa and the focus was upon financial analysis of these types of businesses. The published material is authentic because research scholars reviewed the paper. It is a research output from the UK Department for International Development. Two referees have commented on the paper. The author has utilized concepts such as IRR or internal rate of return, LEV or land expectation value and NPV or net present value. These are essential components of all kinds of financial analysis (Obiri et al., 2007). The authors have conducted primary research on cocoa agro forests and data has been collected from farmers. The authors used “ex ante financial analysis” to assessing the economic viability of the produced cocoa. They have focused on seasonal data as well. The study throws light on the significance of using the discounted cash flow analysis. The traditional systems are no longer valid for financial analysis.

B.    Lessons from the articles

After reviewing the articles, the significance of the evaluation process using various tools of financial accounting has been understood. The first and second articles highlights the ways by which CFOs can make decisions and the importance of capital budgeting. The third and fourth ones focused on financial analysis tools such as IRR, NPV, and LEV.

C.    The usefulness of the concepts for managers

Managers can use both the concepts of financial analysis and capital budgeting for making corporate decisions. Long-term risks can be assessed and managers can devise strategies to meet the financial goals of an organization (Myers, 1974). All kinds of uncertainty can be managed. They can devise economically better projects. They can also manage the financial outcomes.

References

Graham, J., & Harvey, C. (2002). How do CFOs make capital budgeting and capital structure decisions?. Journal of applied corporate finance, 15(1), 8-23.

Harris, M., & Raviv, A. (1996). The capital budgeting process: Incentives and information. The Journal of Finance, 51(4), 1139-1174.

Myers, S. C. (1974). Interactions of corporate financing and investment decisions—implications for capital budgeting. The Journal of finance, 29(1), 1-25.

Obiri, B. D., Bright, G. A., McDonald, M. A., Anglaaere, L. C., & Cobbina, J. (2007). Financial analysis of shaded cocoa in Ghana. Agroforestry systems, 71(2), 139-149.

Sheikhi, A., Ranjbar, A. M., & Oraee, H. (2012). Financial analysis and optimal size and operation for a multicarrier energy system. Energy and buildings, 48, 71-78.