An Analysis of the Financial Management Techniques Currently Employed by Large U.S. Corporations

Moore, James S.; Reichert, Alan K.

doi:10.1111/j.1468-5957.1983.tb00456.x

Cited by 116 publications

(52 citation statements)

References 22 publications

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“…Stanley & Block have also found out that 65 percent of respondents have chosen IRR as their primary technique for project evaluation (Stanley, Block 1984). The results of research conducted by Moore & Reichert revealed that 86 percent of US Fortune 500 firms as primary method use some type of discounted cash flow analysis (Moore, Reichert 1983). Other researches of large firms revealed similar results (for example, Trahan, Gitman 1995;Bierman 1993;Bruner et al 1998 and others).…”

Section: Studies On Behavioural Corporate Financesupporting

confidence: 70%

“…Other researches of large firms revealed similar results (for example, Trahan, Gitman 1995;Bierman 1993;Bruner et al 1998 and others). Moore, Reichert (1983) interalia stated that volatility of economic conditions led to increased importance of rigorous financial analysis in firms -financial executives actively use financial techniques in financial decision making process; least since 1980's relatively sophisticated capital budgeting procedures were accepted across most industries (US case), and many firms supported their decision making with a "package" of formal tools. Trahan, Gitman (1995) surveyed CFO's (Chief Executive Officers) of Fortune 500 and Forbes 200 best small companies and found out that most of respondents appear to have little interest in the current state of academic research in corporate finance and are not minded to use professionals or professors consultations, both paid or unpaid; however they do express a desire to know more about various financial decision methods.…”

Section: Studies On Behavioural Corporate Financementioning

confidence: 99%

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Corporate Behavioural Finance – The Case of Lithuania

Jurevičienė

Bikas

Keliuotytė-Staniulėnienė

et al. 2013

Business, Management and Education

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Abstract. Behavioural finances became especially important in recent years. Majority of studies covers individual investor decision making factors while corporate customers' investment behaviour, as a rule, encompass liability side (capital expenses, financing and structure; dividend policy; assessment of potential investment projects, etc.). This paper aims to establish investment possibilities of nonfinancial corporate investors in financial markets, basing on accomplished survey of companies managers, and strives to determine enterprise investment in financial assets assumptions. Though the results of the survey sample not fully meets the requirements of representativeness but satisfy the minimum margin error -up to 10 percent -acceptable level.

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Section: Studies On Behavioural Corporate Financesupporting

confidence: 70%

Section: Studies On Behavioural Corporate Financementioning

confidence: 99%

Corporate Behavioural Finance – The Case of Lithuania

Jurevičienė

Bikas

Keliuotytė-Staniulėnienė

et al. 2013

Business, Management and Education

View full text Add to dashboard Cite

show abstract

“…Competition. Organizations in regulated industries are operating in expected product markets and gain resources to use similar prediction techniques (Doeringer et al, 1968;Fiorito et al, 1985;Moore and Reichert, 1983;Vatter, 1967). Empirical studies have shown that the accuracy of forecasting techniques varies (Mahmoud, 1984).…”

Section: Manpower Planning In Practicementioning

confidence: 99%

Manpower Planning for Demand Forecasting of Faculty Members using Trend Analysis and Regression

Aref¹,

Sabah²

2015

IJARBSS

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Abstract:Employing adequate manpower is one of the major concerns of modern organizations. As Faculty members having specific characteristics, they are not available when necessary and this requires planning in order to predict their demand in time. In this research, using trend analysis as one of the quantitative method for estimation, first the predictive variables including BA,MA and PhD students also the published articles are predicted for five years, then by using regression equations models, the faculty members by rank, age and gender are forecasted. The findings showed that associate professors, aged 46 to 55 years are the most necessary manpower to be employed. Also the percentage of female faculty members shows significant growth.

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“…The results also indicate a slightly positive correlation between the level of sophistication and firm size. Moore and Reichert (1983), who survey 298 Fortune 500 firms find that 86% of firms surveyed use time-adjusted capital budgeting techniques. Bierman (1993) finds that all 74 responding Fortune 100 companies use some form of discounting, and 93% calculate the weighted average cost of capital.…”

Section: Practice In the Fieldmentioning

confidence: 99%

Do We Need CAPM for Capital Budgeting?

Jagannathan¹,

Meier²

2002

Financial Management

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The classic rule for making capital budgeting decisions is to take projects with positive Net Present Value (NPV). Consider a project that generates an annual, real cash flow of 100,000 forever, starting one year from now. The initial investment is 1,600,000. To decide whether to invest in this project or not, we discount all future cash flows and subtract the initial investment to get the NPV. The decision rule is then simple: If the NPV is positive, take it; if the NPV is negative, leave it. The current textbooks used in all major MBA courses advise financial managers to calculate the cost of capital based on the Capital Asset Pricing Model (CAPM). The project's cost of capital is the rate investors require to undertake the investment, and we should discount all future cash flows at this rate. The cost of capital in the CAPM equals the riskfree rate plus a risk premium. The CAPM asserts that the only relevant risk measure for a project is it beta. The beta factor times the excess return of the market over the riskfree rate determines the risk premium of the investment.A key input for the CAPM is the excess return of the market over the riskfree rate, the market (equity) risk premium. The common practice has been to use the historical average return over a long period as a measure of what investors expect to earn. As a proxy for the market portfolio, a broad equity market index is applied. For the US the average market risk premium of the S&P 500 was 7.43% during the post-war period, whereas the real riskfree rate (six-month commercial paper) was 2.19%. Assuming that the project beta is 1.0 and the firm is 100% equity financed, the cost of capital is 2.19% + 1 X 7.43% = 9.62% and the NPV of our project is negative:100,000/ 0.0962 -1,600,000 = -560,499. We would decide against investing.However, a new strand of literature starting with Blanchard (1993) takes a forward-looking perspective to determine the market risk premium. Instead of taking an average over a past period, these studies infer the rate that justifies the current stock market index level given the expected dividends or earnings of all companies in the index. The evidence from this literature suggests that the market risk premium has been only about 2-4% during the last two decades, substantially below the average return of 7.43% for 1951-2000. If we take the value of 2.55% as the equity premium, the estimate that Fama and French (2001) obtain, the NPV of the same

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An Analysis of the Financial Management Techniques Currently Employed by Large U.S. Corporations

Cited by 116 publications

References 22 publications

Corporate Behavioural Finance – The Case of Lithuania

Corporate Behavioural Finance – The Case of Lithuania

Manpower Planning for Demand Forecasting of Faculty Members using Trend Analysis and Regression

Do We Need CAPM for Capital Budgeting?

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