Strategic Finance Advisory
We help organizations succeed with FP&A, Tax Planning, Complex Accounting, and forecasting, supported by our full Business Process Outsourcing (BPO) services including Intermin CFO, and project management services including M&A, Asset Integration, Due Diligence, asset verification and valuation.
Our strategic Finance Advisory Services provides deep insight for investment planning, decision making, capital control, resource acquisition and allocation, portfolio optimization, and strategy implementation. and operations management. Successful business ventures require large investments in assets (capital expenditures) for Property Plant & Equipment (PP&E), technology, human capital, new product development (NPD), intellectual property, R&D, and other investments to ensure sustainable competitive advantage. Funding should be strategically sourced and allocated for the acquisition of wealth building assets considering the optimal capital structure for your enterprise and industry.
Strategy
From a strategy perspective, firm wealth maximization is achieved by accepting and prioritizing all investments having a positive present value after discounting at the firm’s investment rate policy and break-even time expectancy. Expected investor return rates should be considered when considering the cost of capital. As such, the optimal choice of financing method and appropriate discount rate to use in present value calculations are the most important in decisions in making investments that maximize firm wealth.
Firm financial policy
Investment policy should govern all decisions regarding acceptable return rates for long term investments, dividends paid to equity investors, and maximum interest rates paid to finance all its debt. Comprehensive financial policy should address budget plans, revenue, accounting methodology, debt treatment, capital planning, inventory management, purchasing, investing, and financial management. Generally, when considering an investment or project, if the Internal Rate of Return (IRR) is higher than the WACC, the investment (or project) should be considered good for growth. Business growth initiatives should be funded through a resource that can provide capital throughout all stages of growth and keeping the cost of capital low with proven strategies.
Capital Planning Increases Firm Wealth
- Achieve a lower required rate of return for capital investments. When making capital investments such as a new such as a new facility, capital project for growth, The Weighted Average Cost of Capital (WACC) helps determine if the investment is worth the expense of the capital needed to complete the project. When the Internal Rate of Return (IRR) is higher than the WACC, the investment (or project) should be considered good for growth.
- Increased financial resources for building wealth – With savings from lower costs of capital, strategic investments can be made to improve operational efficiency such as new technologies, new equipment, and newer facilities. Newly gained efficiencies improve the company’s sustainable growth rate (SGR) due to lower capital expense.
- Increased economies of scale. Lowered costs through economies of scale include a. Bulk Purchases for significant discounts. b. Managerial – training for increasing efficiency of staff. c. Financial – lower interest rates for loans and access to better financial instruments. d. Marketing – spreading the cost of advertising over a greater range of output, and e. Investments in new technologies for more efficient assets (PP&E)
Strategic financial management encompasses managing a company’s finances with the intent to succeed by investing in assets to attaining the company’s long-term goals and objectives and maximize shareholder value over time.
