Evaluating Strategic Options and Risk Assessment Business Planning

Июль 25, 2022

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Evaluating Strategic Options and Risk Assessment Business Planning

Содержание

2. Qualitative Evaluation of Strategic Choice Consistency Validity Feasibility Business Risk Flexibility
3. Valuation Techniques Involving Comparable Business Price/Earnings Ratio EV/EBITDA Ratio EV/Sales Ratio EV/Customer Ratio
4. Discounted Cash Flow Analysis Principle 1. $1 today is worth more than $1 tomorrow. Principle 2.
5. Types of Finance Debt Finance Bank Overdrafts. Term Loans Finance and Operating Leases Equity Finance Equity
6. Types of Finance Debt Finance Bank Overdrafts. Term Loans Finance and Operating Leases Equity Finance Preferred
7. Risk Analysis The dimensions of risk The value of resources devoted to the project. The proportion
8. Risk Analysis Types of Risk Business risks can be categorized as: 1.Operational 2.Industry 3.Financial 4.Political
9. Operational Risks Key staff resign or are poached by a competitor. Unforeseen problems occur in the
10. Industry Risks Industry risks are caused by external developments in the industry and may develop as
11. Financial Risks Potential financial risks include the following: A stockmarket collapse prevents a crucial fundraising equity
12. Political Risks Political risks include not only governmental risks but also those resulting from the actions
13. Risk Assessment Quantifying the risks The business planning model can be used to examine the financial
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Слайд 2

Qualitative Evaluation of Strategic Choice
Consistency
Validity
Feasibility
Business Risk
Flexibility

Слайд 3

Valuation Techniques Involving Comparable Business
Price/Earnings Ratio
EV/EBITDA Ratio
EV/Sales Ratio
EV/Customer Ratio

Слайд 4

Discounted Cash Flow Analysis
Principle 1. $1 today is worth more than

$1 tomorrow.
Principle 2. A safe $1 is worth more than a risky $1.
Risk and Reward
The Capital Asset Price Model

Слайд 5

Types of Finance
Debt Finance
Bank Overdrafts.
Term Loans
Finance and Operating Leases
Equity Finance
Equity

Слайд 6

Types of Finance
Debt Finance
Bank Overdrafts.
Term Loans
Finance and Operating Leases
Equity Finance
Preferred

Ordinary Shares,

Слайд 7

Risk Analysis
The dimensions of risk
The value of resources devoted to

the project.
The proportion of total business resources represented by those resources.
The length of time for which the resources will be devoted to the project.
The inherent risk of the project.
The cost of exiting the project.
The recoverable costs were the project to fail.

Слайд 8

Risk Analysis
Types of Risk
Business risks can be categorized as:
1.Operational
2.Industry
3.Financial
4.Political

Слайд 9

Operational Risks
Key staff resign or are poached by a competitor.

Unforeseen problems occur in the production process.
Machinery breaks down or is incompatible with the raw materials.
Stocks become damaged.
Fire, theft and floods.
Information technology problems occur.
The product is so successful that the business cannot meet demand.
The actions of a rogue employee result in large liabilities for the business.

Слайд 10

Industry Risks
Industry risks are caused by external developments in the industry

and may develop as a result of actions by the business itself. They include the following:
A new firm enters the market.
A key supplier closes and prevents the supply of crucial raw materials.
Demand for the product falls or fails to materialize.
A competitor aggressively cuts prices.
A new technology is developed making existing products obsolete.
Two competitors merge providing them with a major cost advantage.

Слайд 11

Financial Risks
Potential financial risks include the following:
A stockmarket collapse prevents

a crucial fundraising equity issue or a merger with a competitor.
Interest rates increase dramatically, raising the cost of servicing the business’s debts.
There is a significant devaluation, which increases the costs of raw materials purchased from abroad.
High demand for the product leads to overtrading and a lack of available working capital to fund the business’s activities.

Слайд 12

Political Risks
Political risks include not only governmental risks but also those

resulting from the actions of trade unions, lobbyists and activists. They include the following:
Sanctions imposed on a country prevent access to customers or raw materials.
Taxation rates are changed or taxation policy is altered.
Grants, loans and subsidies are altered.
Trade unions organise industrial action, preventing production from continuing.
Pressure from lobbyists requires a change in the business practices of the business.
The business suffers organised vandalism by radical protesters.

Слайд 13

Risk Assessment
Quantifying the risks
The business planning model can be used to

examine the financial impact of risk. A useful technique is to run a sensitivity analysis across the key inputs in the model that best relate to the identified risks. Examples of typical inputs are as follows:
The quantity demanded of the product.
The selling price of the product.
Distribution costs.
Sales and marketing costs.
The cost of raw materials.
Interest rates.
Taxation rates.
Exchange rates.

Evaluating Strategic Options and Risk Assessment Business Planning

Содержание

Qualitative Evaluation of Strategic ChoiceConsistencyValidityFeasibilityBusiness RiskFlexibility

Valuation Techniques Involving Comparable BusinessPrice/Earnings RatioEV/EBITDA RatioEV/Sales RatioEV/Customer Ratio

Discounted Cash Flow AnalysisPrinciple 1. $1 today is worth more than

Types of FinanceDebt FinanceBank Overdrafts. Term LoansFinance and Operating LeasesEquity FinanceEquity

Types of FinanceDebt FinanceBank Overdrafts. Term LoansFinance and Operating LeasesEquity FinancePreferred

Risk AnalysisThe dimensions of risk The value of resources devoted to

Risk AnalysisTypes of Risk Business risks can be categorized as:1.Operational 2.Industry3.Financial4.Political

Operational Risks Key staff resign or are poached by a competitor.

Industry RisksIndustry risks are caused by external developments in the industry

Financial RisksPotential financial risks include the following: A stockmarket collapse prevents

Political RisksPolitical risks include not only governmental risks but also those

Risk AssessmentQuantifying the risksThe business planning model can be used to

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