Finance Theory & Financial Strategy
Finance Theory & Financial Strategy
By Stewart C Myers
How do firms integrate strategic planning and financial analysis? It appears to be somewhat haphazard in many cases. Senior management sets a direction, vision and mission statement based upon who the firm is now and how it has evolved. Then sets the firm’s course based upon their ideas of who they are and who they may wish to become. The finance department that handles the financial planning and analysis may support the strategic initiative in some manner, but not in an integrated, holistic approach.
The firm may evaluate projects based upon the net present value (NPV) of expected cash flows for that project. In a strategic sense, the financial planning deals with the firm’s capital needs and decisions. One idea is to look at each project as its own mini-firm, an all equity project or company (Myers pg. 127). General Motors, for example, is based upon this strategic planning and financial planning. When a......
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Approximate Word Count: 787
Approximate Pages: 4 (250 words per double-spaced page)
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