Q1 Q2 living by number
Statement of the Problem
Marine Corp was the maritime solutions provider for the Suria group of companies. Hafiz was the Chief Financial Officer (CFO) of the Marine Corp, who was responsible for the financial management of Marine Crop. The first problem is, Hafiz face dilemma situation whether to approach economic earnings that has required by SURIA group, Value Based Management (VBM) or use profits as practiced by the Marine Corp to report the financial performance of Marine Crop and its subsidiaries.
Cause of the Problem
The issue that has stress in Marine Corp is the Chief Financial Officer, Hafiz was in dilemma. It occured when Hafiz was dilemma whether to use economic earnings as required by the Group or profits as practised by Marine Corp to report the financial performance of Marine Corp and its subsidiaries. Since Hafiz was unsure of whether to use economic earnings as required by the group or profits that is practice by Marine Corp he should have listen to the advice that has been given by his president. Economic earnings are define as the amount of money a business expect to earn, assuming there are no changes in its ability or capacity to produce its product or service (Dictionary, 2014).
Decision Criteria and Alternative Solutions
Because of the President of SURIA Group wants to use the Value Based Management (VBM) Model, the value of the company would be measured by economic earnings. The calculation for economic earnings can be measured as follow:
Economic Earnings = NOPAT – (WACC X Average Invested Capital) In determining economic earnings, all companies within the Group had to apply a 10% cost of capital as per SURIA’s requirements. From Appendix G, it shows the companies’ NOPAT, Average Invested Capital and Weighted Average Cost of Capital (WACC) and from that information, the performance of each company can be measured as follow:
The calculation above shows economic earnings for each company. Green Port would
Marine Corp was the maritime solutions provider for the Suria group of companies. Hafiz was the Chief Financial Officer (CFO) of the Marine Corp, who was responsible for the financial management of Marine Crop. The first problem is, Hafiz face dilemma situation whether to approach economic earnings that has required by SURIA group, Value Based Management (VBM) or use profits as practiced by the Marine Corp to report the financial performance of Marine Crop and its subsidiaries.
Cause of the Problem
The issue that has stress in Marine Corp is the Chief Financial Officer, Hafiz was in dilemma. It occured when Hafiz was dilemma whether to use economic earnings as required by the Group or profits as practised by Marine Corp to report the financial performance of Marine Corp and its subsidiaries. Since Hafiz was unsure of whether to use economic earnings as required by the group or profits that is practice by Marine Corp he should have listen to the advice that has been given by his president. Economic earnings are define as the amount of money a business expect to earn, assuming there are no changes in its ability or capacity to produce its product or service (Dictionary, 2014).
Decision Criteria and Alternative Solutions
Because of the President of SURIA Group wants to use the Value Based Management (VBM) Model, the value of the company would be measured by economic earnings. The calculation for economic earnings can be measured as follow:
Economic Earnings = NOPAT – (WACC X Average Invested Capital) In determining economic earnings, all companies within the Group had to apply a 10% cost of capital as per SURIA’s requirements. From Appendix G, it shows the companies’ NOPAT, Average Invested Capital and Weighted Average Cost of Capital (WACC) and from that information, the performance of each company can be measured as follow:
The calculation above shows economic earnings for each company. Green Port would