1. Financial management Lecture # 6
25/03/2017
Financial management Lecture # 6
Jan H. Jansen

2. Programme (Spring 2008) 25/03/2017 # Date Topic Chapters F&A
Additional readings
Assignments 1
(2 hrs)
Introduction
Financial Statements
Economic Trade Off’s 3
Atrill
Drury
1 (Analyses Annual Report KPN 2006) 2
(4 hrs)
Accounting
Financial Ratios
4 & 5 6
Horngren
2 Benchmarking Annual Reports
Budgetting
Variance Analyses 7
3 (Case outsourcing) 4
Break Even Analyses
Cost Prices 8
4 (Budgetting case) 5
Working Capital Management
Capital Budgetting 10
11 & 12
5 (Variance Analyses)
Interest rate & Risk 12
Brigham
6 (Interest calculations)
DOSIT model
Case study
7 (Capital budget)
Test exam
8 (Investment decision) E Or
Writte exam

3. Investment Decisions

4. Investment trade off (I)
Equipment
Building
R&D
Environment
Sustainability
Staff / HR
Maintenance
Operating costs
Additional Funds
Equity
Loans

5. Investment trade off (II)
Cash Outflows
Equipment
Building
R&D
Environment
Sustainability
Staff / HR
Maintenance
Operating costs
Cash Inflows
Sales
Lower costs

6. Components of the Capital Budget Model
Investment (Year 0)
Economic Life of the Investment
Years 1 - n
Interest Rate: i = r + π + σ
r = real interest rate
π = inflation
σ = risk (project risk mark-up
Annual Cash Flows (During economic life)
Expenses
Revenues

7. Decision Criteria Pay Back Period (PBP) Return On Investments
Discounted Pay Back Period (DPBP)
Net Present Value (NPV)
Profitability Index
Internal Rate of Return (IRR)

8. DOSIT Model Model developed by: TNO (Applied Research in Science)
Chair of TQM in Networks of Organisations
Prof. Gerard Berendsen
Source:
Duurzaam innoveren met de DOSIT-methodiek, G. Berendsen cs, Sigma Kluwermanagement, June 2006

9. DOSIT Model Dutch Duurzaam Ondernemen Selectie Innovatieve Technologie
English
Sustainable
Entrepreneurial
Selection
Innovative
Technology

10. Why DOSIT? Hot topics in business are: Innovation Sustainability
Product innovation
Innovation of processes
Sustainability
Stewardship / Managership / Bailiff (UK) (Dutch: Rentmeesterschap)
Investments

11. Innovation:
Products
Process
Sustainability
Investing

12. Sustainability & Entrepreneurship in SME’s
Company meets the requirements from the government and keeps in mind future reqyuirements
Company fulfils its social and cultural role in society
Company plays in an effective way its role in the huge changes in society & economic development for the mid and long term

13. Sustainability & Entrepreneurship in SME’s
The product, the way the product is used and will be used
The production process (including resources)
The way the product is introduced on the market

14. Basic assumptions: DOSIT model
Focus as a company on a limited number of activities connected to sustainability
Intrinsic motivation of staff concerning change in general and sustainability: specific
Communication in the company concerning sustainability: Top Down & Bottom Up
‘Quick and dirty job’ in SME’s, staff wants to see immediately results
Aspects of sustainability have influence on the continuity of the company
Sound financial base is important for the continuity of the company

15. Profit
People
Planet

16. Stages in the DOSIT methodology
Preparation
Choice of priorities in the areas of Key Success Factors
Selection of possible Innovations
Final choices of Innovations
Implementation of Innovations

17. DOSIT Matrix (Overview Priorities)
Supply Chain ↑
& Value Chain ↑
Raw materials
Components
Business development
Logistic Processes (ITO)
Production
Packaging
Warehousing & Distribution
Product & Market Development
Product Use / Reversed Logistics
 Aspects ↓
Planet
People
Profit

18. Constraints in the process of sustainable innovation
ROI requirement (bottom line)
Requirements clients
How do process interfere in the chain?
Feasibility (in a technical way)
Connection with future developments & ambitions of the company
What is target for the degree of sustainability
How much will be the impact of the innovation (paradigm shift?)

19. DOSIT Method: Excel tool