Wall Street Journal Foreign Investment - Case Study Example

Wall Street Journals’ Review Foreign Investment: Foreign Investment Surges Foreign investment is an area of interest in managementaccounting. The article Foreign Investment Surges highlights the trends of investors in the foreign market in the United States in the years after the financial crisis. The author notes that foreigners are escalating investments over the recent past. In particular, the Europeans have stepped up their activities amid the debt crisis that befell the continent. According to the article, the United States, through foreign direct investment, attracted more than $28.7 billion in the period between January and March. Further, the article elucidates that foreign direct investment subsumes long-term wagers by individuals and organizations such as real estate and acquisitions, but not acquisitions of securities and treasury bonds (Shah, 2012). Figures from the article show that the United States totals reached #234 billion, which was a 14 percent increase from $205.8 billion reported in 2010. Most of this investment emanated from Europe, the article reports. The article is important as it comes at a time when many want to see and assess the performance of companies and the activities of investors since the financial crisis. So far, the figures suggest that America is luring investors well enough to assist it in recovering from the financial catastrophe (Shah, 2012). The relationship between this article and management account is an important one. Management accounting involves assessing costs and processes that affect decisions regarding operation, production and investment. Companies need this information to know how to adjust operations and gain insight that can help them invest better. Market Risk: Fear of Market Risk Ebbs Post Crisis This article talks about the behavior of investors in the recent stock declines. The behavior of the investors is an unexpected one, as the article reports many highly rated investors see the decline as an opportunity to buy stocks. The events of the previous financial crisis and market implosion that took place between 2008 and 2009 served as lesson and impetus for the actions of the investors as explained by this article (Maxey, 2014). We all know of the financial crisis that took place in 2008 and the impacts that it had to both the organizations and stock markets. The fiscal crisis left high-net valued investors with important insight of the understanding of market risks as well as the importance of fluidity, the article reports. Moreover, the article posits rich clients who possess small firms now have better outlook on the market and are prepared to take a little more portfolio risk (Maxey, 2014). The article has a big relationship with management accounting. One can say that management accountant are risk managers, planners, and strategists who need important qualities to make sound decisions. They are involved in important work that assists owners of companies and directors make important decisions concerning company growth and investment. Such information is, therefore, essential for management accountants as well as managers. Decision Making: Secret to Decision-Making Decision-making is an important task that CEOs and management accountants have to undertake every single day. However, CEOs and management accountants do not have any one formula for making decisions. This article presents a unique method that, if used, can help in making sound decisions that can assist companies increase their competitive advantage. Khajak Keledjian, a CEO in one of the companies in the fashion industry could not sit for fifteen minutes in silence, reports this article, and this is where the author focuses on to teach management accountants the trick to making good decisions. Surprisingly, after betting $15,000, a friend confirmed that the forty-one year old CEO could not actually sit down for more than fifteen minutes without reaching out to something, and even while at church, Keledjian found himself reaching out for his BlackBerry every so often (Murphy, 2014). To turn this situation round, the Intermix CEO decided to sign up for meditation classes and other activities that would avert him from being restless and jerky all the time, and instead think. The newfound new trick for making sound decisions fast is not a preserve for the Intermix director, but other C-suite elite have also been using the technique. Bill Ford, Rupert Murdoch, Rick Goings, and March Benioff are just but a few of the CEOs who are touting the merits of meditation techniques (Kinias, 2013). The connection between management accounting and this article is vivid. Managers and CEOs who can make sound decisions that can drive organizations upwards in any market setting are enviable. Companies would fight for such, and, thus, this article offers an important revelation for managers that can help them achieve great decision making skills. Cash Flows: The Big Number The Wall Street Journal’s article named “The Big Number” presents information about cash flow of nonfinancial firms listed in the Standard & Poor’s stock. The information in the article shows that these companies generated a total of $158 billion in their operations. These figures, which are net cash flow after accounting for capital expenditure, represent a 13.6% increase compared to cash flow data of the previous year gathered from S&P’s Capital IQ. Moreover, the article show that cash flow figures have increased by 60.4% when calculated from 2009’s first quarter (Quinn, 2011). The article shows an improvement in the performance of companies in the United States, which is a testament to the measures the firms have been taking to make sure their cash is flowing in more than it is flowing out. The capacity to breed cash stands as the most essential measure management accountants may do to improve the health of the business. Many companies that generate paper profits have gone down because they have lacked the cash to run operations (Quinn, 2011). Besides reporting the cash flow for companies in the United States and presenting the importance of cash flow for companies, the article also documents measures that can assist in improving cash flow. At the lowest level, firms can increase their cash flow by gathering receivables faster and paying bills at a slower rate. If money is leaving the firm at a higher rate than it is entering, the business must seek ways to fund processes for the days that lie in between. Choices that most firms normally resort to when things boil down to this include cash at hand, capital markets’ funds, or bank financing, reports the article. The previous financial crunch pressed even profitable companies to the wall because it only left them with the option of bank financing and capital market’s fund as sources of money to run operations (Quinn, 2011). This article is relevant and has a significant link to management accounting. Management accountants are usually tasked with the task of tracking the flow of cash from the company’s operations. The relationship between management accounting and cash flow is important as it serves as the basis for computing the business correspondent of disposable revenue. Subtracting capital disbursements, or essential investments in items such as machinery and plants, from the cash flow of a company shows the amount of resources a company remains that it can use to finance buybacks, pay dividends, make mergers and acquisitions, or fund critical investments. Indeed, the relationship that the article has with management accounting is more than average – it is important. International Diversification Randy Myers article on diversification illuminates on the views of most investors following the meltdown of the financial market in 2008. The meltdown caused investors to view diversification negatively, in that it no longer works. Many investors concluded that one could not simply protect assets from financial unknowns by spreading it among various kinds of investments after watching almost all types of assets crash. The views, however, are slowly changing, and investors a taking a different position on the issue, notes the author of the article. What investors have realized is that diversification can work if only investors can be aggressive enough in its application. The article posits that investors mostly think that adding a few bonds to what they have in their stock portfolio and perhaps have a small allocation attached to an international stock fund (Myers, 2010). However, the article refutes such measures citing they are not enough. Instead, organizations ought to invest globally in both bonds and stocks. Afterwards, setting aside a modest amount of cash that can go into buying real assets and securities that are protected from inflation can be a robust measure (Myers, 2010). This article’s advice is important for companies that have not learnt lessons following the collapse of the financial markets, which can happen. Surely, shunning away cannot be termed as an appropriate measure, but diversifying strategically is. Activity Based Costing and Management This article presents a process, time-driven activity-based costing, introduced by professors from Harvard Business School and embraced by top hospitals including Mayo Clinic, M.D. Anderson Cancer Center, and the Cleveland Clinic. This new process comprises mapping out all the steps that are essential in delivering health care service, from simple history taking to intricate surgeries. For this process, costs associated with every step in terms of equipment and personnel needed are assessed and calculated. Then, assessors allocate costs to each step calculate the overall correct cost and profit margin (Beck, 2014). None of this step is hard, and the process can actually help an organization calculate actual costs while identifying cheapest methods to do things. The relationship between this article and management accounting is plain clear; finance and accounting processes need to reduce costs while maintaining efficiency to ensure maximum profits. Strategic Planning and Control Managers are usually charged with charting the way forward for the organization. They have to provide the direction that is in line with the vision of the organization. They also have to provide the strategic approaches that will aid in accomplishing the mission that the organization has. In addition to that, managers have to align their interpretation of the goals and vision of the organization with those of the workers or team members (Murray, 2014). Although the things that this article posits are rather obvious, not few managers fail to get these basic things. Most managers usually take their mission, goals, and mission as the organizations they lead presents them. The problem with this approach is that the managers never get to own the mission and goals. Such managers spend their whole life at work reacting and responding to orders from top management, responding to problems and pressures from below, or reacting to the constant demands of the always-busy working environment. Managerial accounting also seeks strategic measures to ensure that things in an organization run smoothly. Having finance and accounting managers who understand and own the goals, visions, and mission of the organizations they work for means a lot in increasing the efficiency of the organization. Management Information System: Decentralized IT It is obvious that technologies are everywhere in today’s highly evolved world, including working environments. Mobile phones, data mining, blogs, social media, tweets, virtual reality, and videoconferencing are just but a few of the examples of advancements that have filled our environments. This article posits that the continuous list of technologies could give businesses major benefits. On the other hand, the same technologies have the capability to cause big disasters to companies. For this reason, the author states, managers find themselves at cross roads not knowing what to do with technologies, at times, and they do get tempted to leave the “information technology” debate to lower level managers and employees (Langer, 2012). However, doing this would be a huge mistake and managers should never do that. This is because IT stands as the backbone of conducting business in a digitally revolutionized economy. The article gives examples of companies that are excelling because top management officers embraced technologies. Google and Amazon.com have been constantly in and out of reviews and debates because of their revolutionary strategies that have technologies at the heart. Over the recent past too, myriad businesses are discovering that their success in highly competitive markets depends largely on the manner in which they manage IT. The mode of managing IT determines whether the manner in which a company deals with its consumers is efficient or not. It also determines whether the employees in an organization will keep on running up and down complaining about business processes or sit down and depend on IT to run operations (Langer, 2012). The importance and connections of management accounting and this topic are lucid. Embracing IT reduces or eliminates bottlenecks that may prevent a company from becoming profitable. Managerial accounting practices go to great lengths to ensure that bottlenecks do not deter a company from advancing, competing effectively, and emerging as profitable. Combining finance, accounting, and IT ensures that businesses perform exemplarily. References Beck, M. (2014, February 23). Searching for the True Cost of Health Care. Retrieved April 9, 2014, from http://online.wsj.com/news/articles/SB10001424052702304888404579379122507671850 Kinias, Z. (2013, September 18). Meditate for More Profitable Decisions. INSEAD Knowledge. Retrieved April 9, 2014, from http://knowledge.insead.edu/leadership-management/operations-management/meditate-for-more-profitable-decisions-2608 Langer, A. (2012, July 5). How Sealed Air CIO Warren Kudman Copes with Decentralized IT. WSJ. Retrieved from http://blogs.wsj.com/cio/2012/07/05/sealed-air-cio-warren-kudman-show-hybrid-approach-to-decentralized-it/ Maxey, D. (2014, February 7). Fear of Market Risk Ebbs Post-Crisis - WSJ.com. WSJ. Retrieved April 9, 2014, from http://online.wsj.com/news/articles/SB10001424052702304680904579368801389594042 Murphy, J. (2014, March 24). CEO’s Secret to Decision-Making: Total Silence. WSJ. Retrieved April 9, 2014, from http://online.wsj.com/news/articles/SB10001424052702304256404579453472794988640 Murray, A. (2014, January 7). How to Set Goals for Employees. Retrieved April 9, 2014, from http://guides.wsj.com/management/strategy/how-to-set-goals/ Myers, R. (2010). The New Rules for Diversification. Retrieved April 9, 2014, from http://online.wsj.com/ad/article/financialplanning-diversification Quinn, M. (2011, October 5). The Big Number. Retrieved April 9, 2014, from http://online.wsj.com/news/articles/SB10001424052970204524604576609740825745286 Shah, N. (2012, June 15). Foreigners Step Up Investment in U.S. WSJ.com. Retrieved April 9, 2014, from http://online.wsj.com/news/articles/SB10001424052702303410404577466692621011900 Read More