Skip to main content

Wealth Management

Since one cannot have profits as the sole goal, therefore a new generally accepted concept of creation of wealth come into force. It says that every business should focus on maximizing wealth and value of shares of the company by providing quality goods and playing a socially responsible role in the society.

Thus as asset is valued on the basis of benefits it produces and not on the basis of its cost. E.g. a pen - it can cost around rs-5 only but can become handy in producing some of the best selling books and stories.

Similarly one can judge the value of course of action on the basis of the benefits that action will produce.

One can measure benefits in the terms of the cash flows that can be produced in the future by that action or asset

Conclusion - Any action or asset that was taken based on the decision that works on the concept of wealth creation and which produces a stream of future benefits exceeding its costs should be accepted taking their uncertainty into consideration.

 


Comments

Popular posts from this blog

The fantastic

Beat them up

Fixed Assets Management

Fixed Assets Management - Capital Budgeting Decisions Fixed assets are like the properties, infrastructure facilities that are required by the business operations to complete successfully. A finance executive has to evaluate and decide on which fixed assets the company should invest so that company can perform all its current and proposed future functions. There are various techniques that are available and that can be used by the finance department to evaluate various proposals for the investments like - pay back period, Net Present Value, internal rate of interest, profitability index. Once the economic value of those fixed assets gets over than a proper depreciation policy should also be formulated.      

Significance of Managerial Economics

As per Prof. Baumol - The three main contributions of economic theory to business economics are - Building analytical models which help in recognising the structure of managerial problems and eliminating the minor details which might hamper decision making and distracts from the main issue. ME can develop tools that may not directly apply to the issue but may enhance the abilities of Business analyst so that he can analyse the issue in much detail and provide a efficient solution. ME provides clarity in various concepts in the business analysis that enables managers to avoid conceptual pitfalls. Decision making in today's business involve a great amount of risk and uncertainty due to uncertain market forces like - policies, demand & supply, changing business environment, political changes etc. This uncertainty and risk in decision making can be greatly reduced if the business conditions and environment in which a business operates can...