WAHID’S METHOD ? THE CHARISMATIC & FRUITFUL GUIDELINE FOR FINANCIAL INVESTMENT DECISION MAKING
Author speech:
This article explicated the analysis of business decisions as economic cost & benefit. If you find the costs and benefits from the investment- You must be clearly defined criteria to be used for evaluation against the investment proposal. The criteria for making an investment analysis of dealing benefits and costs of an investment proposal, these benefits and costs in most cases do not take place directly, but these are variable so that can be generated for changeable periods.
On the basis of my experience, observed, & analysis, this article I have paid attention mainly on the economic benefits achieved from investing in and operating a business. In this article, I have struggled to expose in more specific terms with the economic costs associated by way of business decisions.
Throughout the article I have tried talk about in greater details-the cost of various types of capital employed in a business, examine how this cost is measured, and in what form and for which purposes this economic reality should affect business decision making.
Introduction:
Investment policies have given a new viewpoint to the part of financial administration, Generally, I found that a few people knows the good investment policy and when those people apply their knowledgeable strategy with the investment usually they gain,, it is highly unlikely that without the appropriate knowledge of investment policy a few people try to run a business with a huge amount, but unfortunately most of these investors turn around from this business with huge losses. all decisions involving to business investment from the analysis of investment in running capital such as cash, banks, accounts receivable, inventory and investment capital represented in fixed assets such as buildings, land, machinery, technology etc. to make the right decisions the financier has to take into account elements of evaluation and analysis as the criteria for analysis,
meaning the analysis of investment:
In most types of organizations or private companies, financial decisions are focused or have a clear objective, “the maximization of assets by the utilities, this fact in the present conditions, must refocus on a” maximizing wealth and the creation of “business value”. Against this background in investment resources are allocated and results obtained from them,
Meaning the analysis of Operating decision:
Operating decisions that involve routine responsibilities. Such as planning production and sales, scheduling personnel and equipment, adjusting production rates, and controlling the production Quality
Decisional framework:
The decisional framework I have discussed all along strained the interrelationship of investment, operations, and financing. In my experience observed that, over time, most management decisions cause cash movements in one form or another.
The dynamics of the business system require that funds be available at any time temporarily or permanently from a variety of sources, provided internally or externally. Key internal sources are cash flows from profitable operations or shifts in existing funds commitments.
Type of external sources are borrowing or raising new equity. Because the basic purpose of investing in, operating, and financing a business is to raise the economic value of the owners’ bet over time, management decisions should form economic value for the shareholders by generating after-tax results that are higher than the cost of all the supporting capital inputs.
Investment Decisions
One of the most vital long phrase decisions for any business relates to investment. Investment is the Obtain or making of assets with the purpose of make gains in the future. naturally investment engaged by financial wealth to buy a machine/ building or other asset, which will then give up returns to an organization over a period of time
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I think the first thing is to identify what you want. You must know what the business prospect means for you and what you want to achieve out of your investment. It is generally a good plan to have a pre-planned profit level that acts as an object for your investment work. The good investor will also take time to recognize the market that they are trying to pierce. Do not just rely on information or suggestions from the people. You will need to go and see the accurate operation of the business so that you can review whether you are likely to be winning. The past of business investment is beset with stories of people who jumped against schemes they did not know and ended up paying a very heavy price
Following Solution of considerations in making investment decisions are:
1. What is the scale of the investment – can the company afford it?
2. How long will it be before the investment starts to yield returns?
3. How long will it take to pay back the investment?
4. What are the expected profits from the investment?
A good investor will always look for to administer and shelter their investment. If you just put an investment project and hope for the best, you are on a smooth slope to financial ruin. You will need to pay steady attention to what is happening to your business by requesting for management information and evidence of growth. That way smoothly if there are problems you will know about them and formulate a corrective strategy.
As well established that least standards for investments had to be set high sufficient to pay costs both for the projects exact risk and for the chance loss of forgoing the returns from any substitute uses of the funds invested. Such alternative investments in the company’s normal tricks or in new initiatives were equally assumed to sufficiently reimburse both shareholders and lenders for providing their capital.
Cash flows connected with investment:
When creation an investment the company expects a number of fixed cost and production costs for a positive number of future benefits, these invention costs and profit is called “Cash Flow”, this components are importance for investment decision
I recommended that the company’s generally cost of capital, when used as a minimum standard for the economic attractiveness of investments, totally in person all of these requirements, and value would be created if a project’s cash flow performance exceeded the company’s cost of Capital. The analytical methods directly include any financing costs; rather, the cash outflows and inflows as defined represented only investment outlays on the one hand,
Rate of return required for investment decision:
The required rate of return is the minimum rate of return that is necessary for an investment that will be established. In formative this rate must take into account all internal and external factors that influence the investment decision.
My statement in financial theory which states that “investors are risk-aversive” takes great implication in the logic that, as there is more risk involved in the decision to invest in a project will require a higher give up wealth invested. Thus, the expected return for an investment project depends on the exact project risk assessment, taking into account the risk free rate and to invest in this project. The aspects discussed effective tool in achieving the proper financial management in the decision to rent business investment, but all this must be verified and supplemented by technical studies, math and controls executed by the monitoring accountable for the financial area of the company.
The rules of a good investor are not rocket science. Everyone can achieve some level of success if they take the time to go over their investment opportunities and make the most logical business decisions best on the information available and their own knowledge. Common sense does help as well, especially if you are dealing with people.
Operating Decisions:
Role of Operating Level of Management: The top level management divides about finance production, marketing, rules and system for employees, process and working methods. The middle level management collects necessary wealth and services for their execution and bottom level management implements the rules process, methods and programme shaped by the top level management. This type of execution is associated with the industrial regulation, continuity of activities and most usage of resources. Middle level office supervisors and bottom level jobbers, foremen and workers are connected with this work.
Decisions are being implemented at bottom level and for its efficiency the management’s method has to be followed. It includes following of working method and working process. Due to the process and methods, the work of coordination between the activities becomes effective and an effective control which can be put on all types of works. In short for the decisions of efficiency, the administrative process becomes an important part.
The time prospect for operating decisions is generally shorter than that of the typical business investment. however, operational funds movements, such as increases or decreases in trade credit both used and extended and swings in cash balances and accruals as described in do involve costs, both in the form of out-of-pocket charges and opportunity costs. For case, a near-term decision to take pay for discounts might involve significant economic benefits when weighed against the cost of any incremental borrowing essential to take advantage of the discount. Cash management decisions to minimize bank balances can eliminate the opportunity costs inherent in idle funds. In fact, there are myriad circumstances in which near-term decisions can cause or eliminate the cost of employing funds, as these decisions are often directly linked to incremental sources that entail specific costs.
Effective decisions are being full by keeping the present activities in mind and their main aim is to accomplish the present objectives. These decisions are taken for the getting of positive results by fulfilling the departmental objectives. For this the departmental employees are given training according to their activities and an effecting level’s personnel is given essential powers for the same cases,
Above I have tried to expose the costs associated with obtaining financing and compensating providers of different sources of funds, both short-term and long-term, which must be considered by management in making any financing decision. Obviously, using any type of funds entails an economic cost to the company in one form or another. One of management’s obligations is to expand a pattern of funding that both matches the risk/reward profile of the business and is suitably modified to meeting the evolving needs of the company. At the same time, the use of long-term funds entails meeting the prospect of creditors, and meeting or if possible exceeding the potential of the providers of equity funds, the company’s shareholders.
Conclusion: The operative decisions are different in nature in comparison with to strategic decisions. Mostly they possess a special importance for achieving the short term motives in framework to the internal situation of a business component
MHOHAMMAD WAHID ABDULLAH KHAN
S/O MOHAMMAD SAADULLAH KHAN
Dhaka, Bangladesh
Mr. Mohammad Wahid Abdullah Khan is the Project director of “Max Textiles Ltd”.Mr. Wahid has been in accounting field since 1999. Prior to that he had completed over ten (10) years in various fields of Business like – Accounts, Finance, Internal & External Audit, project budgeting and project costing related positions in some of the largest group companies & the join venture companies in Bangladesh.
He consults with small- medium business owners and services professionals, business consulting service and project process. He is most experience in Financial Risk Assessment, Financial analysis, Financial Advising and Project Cost Analysis. He has published more than 100 articles & case study in different international journals. Such as Business, finance, personal finance, international finance, auditing, Risk assessment topic and performance & industrial related,
Mr. khan’s most popular articles is ”WAK” Model - The way of best solution for an organization internal audit process,( 1st,2nd,& 3rd part) “WAK” Model- for successful financial resource , “Wahid khan“- cost analysis, Wahid theory – the key of dynamic series for successful financial consulting, Wahid techniques – the Significance and dependability manner for Performance audit(1st,2nd,& 3rd part) Wahid’s Opinion - non-conformity among the performance audit and financial audit, Wahid’s view- The cogent task and the confront of financial/economic analysis in the modern business decision making , Wahid’s outlook- The Business Financial Analysis Should Be Included several required Documents with the analysis report or plan, WAHID’S JUDGMENT-difference strategic plan as opposed to an operational plan , & PPBS Model, he has consulted with more than 25 service & product companies, in recent years Mr. khan has been spending most of his professional time for financial consulting , Mr. Wahid is the owner of “WAM” Associates and “WAK” business solutions;
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