A 6-step approach to explaining extraordinary resources

To carry out day-to-day business functions, companies use many different resources, but how many of these resources help the company to distinguish itself from other similar companies/competitors? It is argued that in order to create organisational value, a company must have at least one ‘extraordinary resource’. So what is an extraordinary resource? Extraordinary resources can […]

Dividend Policy (Part II) – the implications for shareholder wealth

Retained earnings are a major source of finance to many companies, and the amount paid out as dividends will have a direct effect on the retained earnings balance, thus the value of the company. Many of the economic theories examined in this article have already been discussed in Dividend Policy – which is the best […]

Capital Structure: does one size really fit all?

Capital structure is the make-up of a company’s capital i.e. debt and equity. The amount of debt and equity in a company’s capital structure is reflected in the cost of capital. Each type of capital source has benefits and drawbacks, and therefore it is suggested that directors should try to maintain a capital structure that […]

The [In]Efficient Market Hypothesis: Bursting the Bubble

There are three different types of market efficiency. Operational efficiency means that the market should operate at a minimum cost, speedily and readily. Allocational efficiency means that the market should allocate society’s limited resources to companies that will make the best use of them. Finally, informational efficiency means that the market should incorporate all available […]

Creative accounting and the IASB conceptual framework – a futile relationship?

Creative accounting, a term first introduced by Ian Griffiths (1986), is commonly defined in the UK as “a form of accounting which, while complying with all regulations, nevertheless gives a biased impression (generally favourable) of the company’s performance” (CIMA, 2000 cited by Jones, 2011). However, this definition is very narrow in comparison to others such […]

Integrated reporting – the next evolutionary step in corporate reporting?

Integrated reporting is a relatively new approach to corporate reporting, which is rapidly gaining international recognition through global giants such as Unilever, and has been fully mandated in South Africa. It is founded on ‘integrated thinking’, which helps to demonstrate interconnectivity of strategy and objectives, performance, risk, and importantly helps to identify sources of value […]

Annual reports are getting longer, but are they more useful?

“Annual reports are getting longer but not necessarily more useful”. Critically evaluate the above statement including comments from the current literature and debate, and provide examples from annual reports and make reference to the IASB conceptual framework, where appropriate to support your arguments. Annual reports communicate and present in truth and fairness the activities of […]

Investment Appraisal, Part V: Capital Asset Pricing Model [CAPM]

A five-part series on investment appraisal as part of corporate finance. This article focuses on the Capital Asset Pricing Model and how this can be used to analyse share portfolio’s.

Investment Appraisal, Part IV: Project Risk and Sensitivity Analysis

A five-part series on investment appraisal as part of corporate finance. This article focuses on risk assessment and management techniques, with a particular emphasis on sensitivity analysis.

Investment Appraisal, Part III: Inflation and Capital Rationing

A five-part series on investment appraisal as part of corporate finance. This article focuses on how company’s account for different types of inflation, and determine which projects to take when restricted by capital funding.

Andrew Scouller

Simplifying all things business: cutting the waffle and getting to the point.