Financial management Essay Example | Topics and Well Written Essays - 250 words - 3

Financial management - Essay Example Following are some techniques that are used in investment appraisal of the project. The basic advantage of this technique is that ROCE is much simpler than other methods and can links with other accounts easily. But seeing as both side of coin ROCE also have some disadvantages like ROCE is not an absolute measure of the project life and timing of cash flow is not considered in this method. Net Present value (NPV): NPV simply means that what is the value of future flows in current terms. It is considered to be a superior to most of other methods. It consider the time value of money and an absolute measure of return but it also have some disadvantages like it is difficult to calculate and difficult to explain to managers. Internal rate of return (IRR): IRR represent the discount rate at which NPV of an investment is Zero. It represents the breakeven cost of capital. As other techniques IRR has also some advantages like it consider the time value of money and use cash flows rather than profits. The main benefit of the IRR is that it is in percentage therefore easily understood by the managers. But as other methods IRR has also some disadvantages like it is not absolute measure of probability and also complicated to calculate. The cost of capital is the rate of return that the enterprise must pay to satisfy the providers of funds, and if reflect the riskiness of providing funds. Valuation of cost of capital is depend upon is based upon these certain

Porters diamond model was developed to explain the competitive Essay

Porters diamond model was developed to explain the competitive advantage of globally leading industries in different countries. To what extent do you believe that the model is effective in achieving this - Essay Example Intensity of global competition is very high today mainly due to the fast growth of emerging economies like China, India, and Brazil. Alliances of emerging economies like BRICS play a significant role in influencing the competitiveness of national economies. This paper will analyse to what extent the Porter’s diamond model is effective in achieving its stated objectives giving particular focus to concepts of industry clusters, diamond model, and emerging nations. According to traditional economic theories, the major factors affecting the competitive advantage of regions or nations were land, location, natural resources, labour, and the population size. As none of these factors can be influenced by external forces, people had believed that national prosperity was passive or inherited and hence nothing could be done to improve the situation. However, Porter argued that sustained industrial growth is not depended on these basic inherited factors. In order to replace this traditional misconception, Porter introduced a concept called industry cluster, which represents a group of interconnected firms, suppliers, and related industries in a particular location. He stated that competitive advantage of nations is determined by four interlinked economic factors existing in such industry clusters. The theorist also suggested that these economic factors can be significantly influenced by strong technological and knowledge base, government support, skill ed workforce, and culture. According to a report by the Economist Intelligence Unit (2011), â€Å"there are few economic development policies as popular as clusters†. Recognising the importance of clusters, today countries, regions, and even cities strive to develop a network of complementary and competitive firms. The recent global financial crisis substantially increased the significance of clusters. The report also says that locating firms in the same place does not constitute clusters unless there