Article Review; Finance Theory And Financial dodge (Myers) The phrase Finance Theory and Financial Strategy by S. Myers provided and interest perspective on the relationship surrounded by finance opening and monetary strategy. In essence he attempts to answer the motion as to why managers do non use theory in strategic planning. The article addresses a transgress between theory and strategy. Myers states three reasons why this prison-breaking exists. First, its due to differences in language and cultureÂ. Second, its the misuse of finance and hence not accepted in the strategic formula. And third, it is a result of a failed discount rateed cash flow analysis. (Myers) This cranny is near apparent when a firms strategic goals and financial goals are in conflict. This appears as managements clientele for EPS while implementing strategic maneuvers. This ultimately is a short-run vs. long approach conflict among and within managers. The gap could be expound as a cultu ral problem. Needing solely additional dialogue to suffice. As both financial and strategic analyses are matter to error. One might waitress a checks and balances system in place whereby the financial is checked by the strategic and the converse. For example, during a strategic analysis one would expect a run of double-checking, with a NPV calculation, to be demonstrated. Unfortunately this is seldom accomplished.
The misuse of finance theory is also a alter factor to the gap between finance theory and financial strategy. Typical errors do in calculate DCF create a situation favoring short-term projects. For example, inner projects are compared by thei! r internal rate of repossess and not NPV, inconsistent treatment of splashiness while computing DFC, and using unrealistic high discount rates. With this said it appears that managers whitethorn not truly understand what it takes to found a just DFC analysis. And lastly, the gap between theory and... If you insufficiency to get a full essay, order it on our website:
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