ECONOMICS FOR INVESTMENT DECISION MAKERS CFA Institute is the premier association for investment professionals around the world, with over , The economics background investors need to interpret globaleconomic news distilled to the essential elements: A tool of choicefor investment decision-makers . The economics background investors need to interpret global economic news distilled to the essential elements: A tool of choice for investment decision- makers.
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Kp Economics for Investment Decision Makers Workbook av Christopher D Piros, Jerald E. PDF-bcker lmpar sig inte fr lsning p sm skrmar, t ex. INVESTMENT. DECISION. MAKERS. WORKBOOK. Micro, Macro, and International Economic,. Christopher D. Piros, CF. Jerald E. Pinto, CFA. WILEY. Thank you for downloading economics for investment decision makers workbook micro macro and international economics. Maybe you have knowledge that.
Risk is taken into account in discount rate setting in less than one company out of five.
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Time value of money. Three quarters of the companies surveyed use a dynamic method to assess profitability NPV or IRR and the simple pay-back method at the same time. Strong pressure in the short-term is indicated by several respondents in the interviews.
As expressed in a rather emblematic way by the general manager of the Geneva subsidiary of an American company company no. Outside financing and leverage.
The large majority of companies in our sample are self-financed and are uninterested by a loan, even at a reduced rate of interest, thus giving up the advantages of financial leverage. IFC explains these findings by the fact that many companies do not understand the advantages of financial leverage. Based on our theoretical framework, our explanation would be that it is because these investments are not considered as strategic, so that internal financial resources are not granted and outside financing is not considered an option.
For example, the person in charge of energy in company no. Based on our findings, we can conclude that the way a project is categorized influences the procedure and the profitability assessment method, as well as profitability requirements and financing. The answers of the Geneva managers hereby support the findings of previous studies regarding the respective influences of financial and strategic aspects of investment projects, as well as the validity of our model of investment decision making.
The next section will discuss this point. Energy-efficiency investments behavior Strategic character of energy-efficiency investments Energy-efficiency investments exist as a category for almost half of the 18 companies which responded to our questionnaire, in a similar proportion in the tertiary and secondary sectors. The fact that energy-efficiency investments do—or do not—exist as a category in companies has never been discussed in the energy-efficiency literature.
Actually, the issue of investment categorization, in spite of its consequences on investment choices, has been almost completely left out of the general investment literature as well, probably because there has been no need to look for any special treatment applied to a category in particular.
How strategically are energy-efficiency investments considered? This is an important question since strategic character is an essential condition for an investment project to be chosen. If energy-efficiency investments are perceived as non-strategic, their chances of being chosen will be rather low. Competitive advantage is a three-dimensional concept, composed of three interrelated constituents: costs, value, and risks as represented by Fig.
Based on the measurement tool described in the methodology section see p. Three main themes emerge from our empirical research. First, energy-efficiency investments are perceived as non- to moderately strategic by our respondents. Let us further examine these three themes. The average score is 9.
Based on these results and according to the measurement scale defined 46 see also the methodology section, p. Energy outages are perceived as a minor risk by companies, only a small minority of which are equipped with a backup system to produce electricity in case of a grid breakdown.
Economics for Investment Decision Makers: Micro, Macro, and International Economics
The prospect of energy costs reduction is, however, not as stimulating as one might believe; indeed, in the De Groot et al. This answer is especially interesting because companies questioned by De Groot et al.
If energy costs are considered not important by managers, the perspective of an energy costs reduction is not a very powerful factor in motivating them toward investing in energy-efficient technology.
Thus, energy cost-reduction is a stimulating factor, but not always sufficient to entail positive decisions regarding energy-efficiency investments.
Again, the importance of the strategic character of an investment provides explanatory power of corporate investment choices, as these results show that energy costs must not be interpreted according to a financial approach but according to a strategic approach.
For certain companies confronted with competition for prices and low costs, such as the machinery or metals industries, low costs are a strategic necessity of competitiveness and thus, of survival. This is the situation faced by companies, nos. For these companies, energy costs are considered a somewhat necessary evil.
The third important conclusion of our findings regarding the strategic character of energy-efficiency investments is the variety of interpretations, which is observed. Yet, as a general finding of our empirical research, we can state that energy-efficiency investments are considered at best, on average, as moderately important by respondent managers. Energy-efficiency investment behavior According to our theoretical framework, non-strategic investments lose the competition for human and financial resources which exists within each company.
Therefore, the low strategic character of energy-efficiency investments should have negative consequences. This is supported by our findings, as described in this section. Two questions, F 53 and F, 54 in particular, aimed at highlighting differences in the treatment between general investments and energy-efficiency investments.
Question F investigates the time horizon used by companies to assess investment profitability all investment categories; several answers possible. These findings can be interpreted as proof of a different and unfavorable treatment applied against energy-efficiency investments. This interpretation is supported by a statement given by the energy manager of company no. Thus, companies would allow longer durations for investments in the production tool. Chapter 1. Welcome to Economics!
Economics acknowledges that production of useful goods and services can create problems of environmental pollution.
Microeconomics and Macroeconomics
It probes questions like how to tell when big businesses or big labor unions are operating in a way that benefits society as a whole and when they are operating in a way that benefits their owners or members at the expense of others. It looks at how government spending, taxes, and regulations affect decisions about production and consumption. It should be clear by now that economics covers a lot of ground.
That ground can be divided into two parts: Microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses; Macroeconomics looks at the economy as a whole.
It focuses on broad issues such as growth of production, the number of unemployed people, the inflationary increase in prices, government deficits, and levels of exports and imports. Microeconomics and macroeconomics are not separate subjects, but rather complementary perspectives on the overall subject of the economy.
To understand why both microeconomic and macroeconomic perspectives are useful, consider the problem of studying a biological ecosystem like a lake.
One person who sets out to study the lake might focus on specific topics: certain kinds of algae or plant life; the characteristics of particular fish or snails; or the trees surrounding the lake. Another person might take an overall view and instead consider the entire ecosystem of the lake from top to bottom; what eats what, how the system stays in a rough balance, and what environmental stresses affect this balance.
Both approaches are useful, and both examine the same lake, but the viewpoints are different. In a similar way, both microeconomics and macroeconomics study the same economy, but each has a different viewpoint.
Whether you are looking at lakes or economics, the micro and the macro insights should blend with each other. In studying a lake, the micro insights about particular plants and animals help to understand the overall food chain, while the macro insights about the overall food chain help to explain the environment in which individual plants and animals live.
In economics, the micro decisions of individual businesses are influenced by whether the macroeconomy is healthy; for example, firms will be more likely to hire workers if the overall economy is growing.
In turn, the performance of the macroeconomy ultimately depends on the microeconomic decisions made by individual households and businesses. Microeconomics What determines how households and individuals spend their budgets? What combination of goods and services will best fit their needs and wants, given the budget they have to spend? How do people decide whether to work, and if so, whether to work full time or part time?
How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means? What determines the products, and how many of each, a firm will produce and sell? What determines what prices a firm will charge?
What determines how a firm will produce its products? What determines how many workers it will hire? How will a firm finance its business?Exchange Rates and the Trade Balance: Positive impact on the company is perceived as being low or impact may even be potentially negative as, for instance, in case of a production line disruption due to the installation of new less energy-consuming equipment.
Income Elasticity of Demand: The analysis of macro and micro environmental factors and conditions is one of the. Economics for Investment Decision Makers: Historical Perspective on Currency Regimes 4. Energy outages are perceived as a minor risk by companies, only a small minority of which are equipped with a backup system to produce electricity in case of a grid breakdown. Fiscal Policy 3.
What studies of practice do seem to suggest is that the theory and practice of strategic investment decision-making need to take into account both economically rational and intuitive decision processes.
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