From an accounting prospective, the major problem with the calculations mentioned in the article is determining the rate of return and length of the marketing investment. While the initial value of the “investment”, i.e. marketing expense, can be easily determined, determining the real value after the investment has been made has the potential to be biased without a commonly used measurement. The value of the investment could also fluctuate from year to year based on the companies’ profitability even though marketing had not direct
This is because according to Elliot (1986), it stated that historical cost assumes money holds a constant purchasing power. The specific price-level changes (shifts in customer preference and advances in technology), inflation, and fluctuation in exchange rates for currencies that happen in the modern economy cause this assumption less valid. Furthermore, historical cost does not consider the changes in price. In times of rising prices, the companies tend to overstate the profits and distribution of the profits to the shareholders will cause trouble to the company. This is because the historical cost does not
"It all depends on the assumptions." To see just how good some of the new metrics are at valuing acquisitions, we asked both Stern Stewart and HOLT Value Associates LP to calculate a fair value for Snapple at the time of its acquisition by Quaker, using only data that was publicly available at that time. Stern Stewart declined, citing its former consulting relationship with Quaker, but HOLT agreed to take on the assignment using its CFROI (cash flow return on investment) methodology. First, some background. In valuing a company whose CFROI is higher than average, HOLT assumes those returns will gradually fade toward the market norm because of competitive pressures.
Thus, J&L’s operating margin was exposed to the volatility of fuel prices. In order to stabilize operating margin, J&L has two options. One is to enter fixed-price contracts with its fuel suppliers, however, it does not work, because fuel suppliers tend to walk away when fuel prices rise and J&L will be left with unattractive options. The other (and the only available) option is to hedge by purchasing derivatives. Argument against hedging The most important argument against hedging this type of risk is that a corporation needs to, in exchange for hedging, (i) give up the upside of commodity prices going down (in futures, swaps and collar) or (ii) pay premiums (in options) or (iii) both.
The perception of investors is determined by the information incorporated in the announcement itself and in firm specific characteristic, but also by economic conjuncture” The next reason of the board’s decisions lays in the fact that the GTX was prioritizing the relationships with stockholders, neglecting the other stakeholders at the same time. As for other kind of relationships between the stock prices, layoffs and mergers and acquisitions –
Segregating the cost of materials, direct labor, and variable overhead from fixed overhead costs, management’s cost control efforts would be enhanced. The treasurer is worried about the marketing department using the same markup in price over variable costs. In other words, he is afraid that with a constant markup as the costs increase or decrease so does
Loyalty points program PDL operates a loyalty points program, which will impact on the measurement of sales revenue, important for analysts. Currently, a sale transaction with point value attached is recognized as a sale entirely in the current period. An expense and liability for the expected cost – not sales value – of goods to be redeemed in the future is recognized in the same time period as the sale. This policy maximizes the sales value recorded with the initial transaction. It does not reflect the substance of the transaction, though, which is that PDL has rendered multiple deliverables in sale: both the initial sale, and the subsequent sale based on points value are being sold.
There are a few different ways to estimate terminal value which are: accounting book value, liquidation value, replacement value, constant growth perpetuity value, discounted cash flows, price/earnings, value/EBIT, and price/book. For this case we felt that accounting book value, constant growth perpetuity, and replacement value estimate should not be used. Accounting book value because it only looks at the original price and undervalues the company because
Such as tax consideration, diversification, control, purchase of assets below replacement cost and synergy and so on. Base on the situation described upon, CompuTech needs to merger a company which can enrich their production line, which is the financial software, and CompuTech also needs that company have enough market following in the financial software market. So the merger decision is made based on the consideration of many reasons. The CompuTech want to Growth, want to expend more market, more users. The Synergy would be reasons why CompuTech want to merger CCI, because CompuTech have no experience about develop financial software, but after merger CCI.
As marketer’s decision of reducing on price, which we can consider it as investing on potential customers, to ensure their interest in one specific brand. In one period we consume, in the other time we save for investment. Not to mention, in the time of having high cost of living which leads to the shrinking of consumers’ purchase power, or we can also see the inflation on the price of goods. In this case, by repositioning a company’s brand meanwhile realigning with the perception of value in consumers’ mind is critical for a firm to sustain its brand image amount the publics. Even though this action has caused a short term profitability decline, but for firms’ long-term sustainability, it is vital to keep up with customers’ perceived value, and understanding the core idea of value-pricing strategy.