Chapter 17
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Transcript of Chapter 17
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CHAPTER 17
EXPANDING BUSINESS
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LEARNING OBJECTIVES
1. Explain the alternative that can be used to expand the business.
2. Describe how capital budgeting can be used to evaluate investment
3. Explain the purposes of merger and acquisition, the process and benefits
4. Explain how business can have an effective short term asset management
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INTRODUCTION
Objective of conventional business is to maximize shareholders wealth while in
Islamic business the goal is not to maximize but to have a just profit.
One of the method is to have good investment plan. In expending business, investment
plays a major role.
Other alternative can be done is through merger and acquisition.
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INVESTMENT DECISION
Companies venturing outside Malaysia
Tabung Haji CIMB Bank AirAsia Felda
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CLASSIFICATION OF CAPITAL EXPENDITURE
Expension of current business AirAsia Felda Tabung Haji
Developing new business Proton Honda
Investment in an assets Industries from labour intensive to
technology intensve
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CAPITAL BUDGETTING TASK
Capital Budgeting Capital budgeting is a required managerial
tool. One duty of a financial manager is to
choose investments with satisfactory cash flows and rates of return.
Therefore, a financial manager must be able to decide whether an investment is worth undertaking and be able to choose intelligently between two or more alternatives through evaluating and comparing before selecting the project.
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CAPITAL BUDGETING TASK
Propose New Projects Estimate Cash Flows of Projects Determine Whether Projects Are Feasible Implementing Feasible Projects Monitor Projects that were implemented
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SHORT TERM INVESTMENT DECISION
Types of investment is known as working capital management which also known as short term assets and liabilities.
Short Term Assets
• Cash•S/term securities• Acct receivable
• Inventory
Short Term Liabilities
• Acct Payable• S/term loan
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INVESTMENT STRATEGY
Liquidity Management
Accounts Receivable
Management
InventoryManagement
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MERGER & OTHR FORMS OF RESTRUCTURING
Immediate Growth – TM Touch (013) under Telekom Malaysia with Celcom (019)
Economic of Scale – TM Touch and Celcom. Media Prima (TV3, Channel 9, 8 TV, NTV7, Hot FM, Fly FM, 1 FM)
Managerial Benefits – BOC-BBMB then BCB merge CIMB becomes CIMB Bank acquire Southern Bank
Tax Benefit
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MERGER ANALYSIS
Identify PotentialMerger
Prospect
Make Merger Decision
Evaluate PotentialMerger
Prospect
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MERGER PROCEDURES
Financing of Merger
Integrating theBusiness
Tender Offer
Post MergerEvaluation
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Tutorial Questions
As per discuss questions page 218…