Tools for evaluating operating decisions

2020 ◽  
pp. 319-345
Author(s):  
Freddie L. Barnard ◽  
John Foltz ◽  
Elizabeth A. Yeager ◽  
Brady Brewer
Keyword(s):  
Operating Decisions

Informational Efficiency and Liquidity Premium as the Determinants of Capital Structure

2010 ◽  
Vol 45 (2) ◽  
pp. 401-440 ◽  
Author(s):  
Chun Chang ◽  
Xiaoyun Yu
Keyword(s):  
Capital Structure ◽  
Information Acquisition ◽  
Operating Efficiency ◽  
Informational Efficiency ◽  
Information Revelation ◽  
Security Prices ◽  
Liquidity Premium ◽  
Maximum Information ◽  
Informed Traders ◽  
Operating Decisions

AbstractThis paper investigates how a firm’s capital structure choice affects the informational efficiency of its security prices in the secondary markets. We identify two new determinants of a firm’s capital structure policy: the liquidity (adverse selection) premium due to investors’ anticipated losses to informed trading, and operating efficiency improvement due to information revelation from the firm’s security prices. We show that the capital structure decision affects traders’ incentives to acquire information and subsequently, the distribution of informed traders across debt and equity claims. When information is less imperative for improving its operating decisions, a firm issues zero or negative debt (i.e., holding excess cash reserves) in order to reduce socially wasteful information acquisition and the liquidity premium associated with it. When information is crucial for a firm’s operating decisions, the optimal debt level is one that achieves maximum information revelation at the lowest possible liquidity cost. Our model can explain why many firms consistently hold no debt. It also provides new implications for financial system design and for the relationship among leverage, liquidity premium, profitability, and the cost of information acquisition.

Cost Management Research

2017 ◽  
Vol 30 (3) ◽  
pp. 187-209 ◽  
Author(s):  
Rajiv D. Banker ◽  
Dmitri Byzalov ◽  
Shunlan Fang ◽  
Yi Liang
Keyword(s):  
Cost Management ◽  
Research Literature ◽  
Financial Accounting ◽  
Future Research ◽  
Management Research ◽  
Managerial Decisions ◽  
Conceptual Innovation ◽  
Challenges And Opportunities ◽  
Cost Behavior ◽  
Operating Decisions

ABSTRACTThe traditional view of cost behavior assumes a simple mechanistic relation between cost drivers and costs. In contrast, contemporary cost management research recognizes that costs are caused by managers' operating decisions subject to various constraints, incentives, and psychological biases. This conceptual innovation opens up the “black box” of cost behavior and gives researchers a powerful new way to use observed cost behavior as a lens to study the determinants and the consequences of managers' operating decisions. Banker and Byzalov (2014) presented an overview of the economic theory of cost behavior and major estimation issues. The research literature on cost management has grown rapidly in the past few years and has enhanced the understanding of how managerial decisions influence observed costs. In this study, we provide a comprehensive review of recent findings and insights, with a particular emphasis on the implications of cost management for understanding issues in cost, managerial, and financial accounting, and challenges and opportunities for future research.

Alliance Concrete: Just One More Thing

2017 ◽  
pp. 1-5
Author(s):  
Marc L. Lipson
Keyword(s):  
Sensitivity Analysis ◽  
Financial Statements ◽  
Parent Company ◽  
Capital Costs ◽  
Financing Choices ◽  
Operating Decisions ◽  
One Year ◽  
Ready Mix Concrete

After having negotiated major financial and operating decisions with its parent company, the CFO of this small ready-mix concrete subsidiary is asked to provide a valuation of the subsidiary. A one-year forecast of financial statements is provided along with information on long-term operating expectations and capital costs. This otherwise straightforward valuation exercise is enhanced by (1) the need to select between the parent- or comparable-firm costs of capital, (2) sufficient guidance to perform an illuminating sensitivity analysis, and (3) a sufficiently clear and rich context in which to illustrate the linkages between operating and financing choices. A teaching note and instructor and student Excel spreadsheets are available.

Operating decisions, supplier availability and quality: An empirical study

1995 ◽  
Vol 12 (3-4) ◽  
pp. 387-396 ◽  
Author(s):  
Sunder Kekre ◽  
B.P.S. Murthi ◽  
Kannan Srinivasan
Keyword(s):  
Empirical Study ◽  
Operating Decisions

Effect of Operating Decisions on the Design and Energy Consumption of Inverted Batch Distillation Column

2009 ◽  
Vol 4 (1) ◽  
Author(s):  
Aboubaker Z Masoud ◽  
Iqbal M Mujtaba
Keyword(s):  
Energy Consumption ◽  
Energy Cost ◽  
Cooling Water ◽  
Problem Formulation ◽  
Capital Cost ◽  
Design Stage ◽  
Market Demand ◽  
Batch Distillation ◽  
Operating Decisions ◽  
Utility Cost

In this paper, the effect of operating decisions on the design and energy consumption for inverted batch distillation is considered. In distillation, utility cost is a function of column vapour load (V). We present a different type (as compared to what is available in the existing literature) of optimisation problem formulation and show that for a fixed market demand scenario minimisation of V for a given N will not only minimise the utility cost (cooling water + energy cost) and the capital cost but will also maximise the profitability of the operation. Also, with several examples of binary separation, it is shown that the decision of operating policy (such as constant reboil ratio, time dependent reboil ratio, etc.) at the design stage can have a significant impact on the capital and utility cost and overall profitability. This will in turn have significant effect on global warming as savings in utility cost reflects savings in energy cost. For difficult separations, which are capital and energy intensive, 40% savings in capital cost, 60% savings in utility and 70% improvement in profitability are possible if operating decisions are taken at the design stage.

Relationships between Machiavellianism, Task Orientation and Team Effectiveness

1983 ◽  
Vol 53 (3) ◽  
pp. 859-866 ◽  
Author(s):  
Robert E. Jones ◽  
Charles S. White
Keyword(s):  
Team Effectiveness ◽  
Business Students ◽  
Simulation Game ◽  
Task Orientation ◽  
Full Time ◽  
Face To Face ◽  
Operating Decisions ◽  
Graduate Business Students

In this study 115 graduate business students most of whom were men employed full time in technical-professional and management fields operated in 32 groups to compete in a management-simulation game. Group task orientation and Machiavellianism were significant predictors of the groups' effectiveness. Machiavellianism, task orientation, and their interaction accounted for 46% of the variance in the teams' effectiveness. Earlier studies found high Machs to be more successful than low Machs in face-to-face situations. This study extends the work on Machiavellianism in that the context offered little opportunity for meaningful face-to-face interaction among compering groups, yet groups scoring high in Machiavellianism made strategic and operating decisions which led to substantially more favorable outcomes.

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