The notion of value-based management has become widely embraced by corporate managers. As the authors of a recent article entitled, “The Value-Based Management Commitment,”
(http://businessfinancemag.com/bpm/value-based-management-commitment )point out, the real problem associated with value-based management is the development of appropriate metrics to achieve behavioral changes. One challenge is that value-based management concepts never make it out of the finance department. After reading this article, answer the following questions:
1. What is the goal of value-based management? Is its focus on reported earning or shareholder/stakeholder wealth?
2. Describe the difficulties in developing performance measures and the role that the finance department should play in developing appropriate measures.
3. What is one of the major problems associated with the budget process as it is used by most companies in short-term planning?
Question 2:
The just-in-time inventory system is designed to reduce the inventory period. In essence, companies pay their suppliers to carry the inventory for them. Reducing the inventory period reduces the operating cycle and thus the cash cycle. This reduces the need for financing.
Consider what type of cost is being minimized and what costs are likely to increase. Please, explain.
Are JIT inventory policies appropriate for all industries?
N.B: Need about 5 lines each for each question
