4 responses Sep 10

Preethi work:

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The incremental cash flows

When implementing a new project, there is need for the organization to come up with budgeting models that will ensure the organization meets its goals at the end of the day. One of such approaches is the use of incremental cash flow whch is basically a financing model whereby the cash flow is realized  immediately anew project has been accepted by the top management  for implementation. This emanates from increase of the cash flow which emanates from key business operations that will trigger the acceptance of the new capital investment in the project (Habib, 2011).  It is important therefore  for the finance managers to when launching new products or implementing anew project to  come up with capital budgeting decisions that will ensure the business gets it value at the end of the day.

In this case, the incremental cash flow needs to adopt a holistic approach which will need to capture  the following key factors .One is  the initial investment outlay which is basically the amount that is required in starting of anew project product. The second component is the operating cash flow which is the overall amount of cash that will be generated by the new project less than the operating cash flows and the raw material expenses (Sayari & Mugan, 2013). The last component is the terminal cash flow that is the net cash flow which is captured at the end of the project and this occurs after selling of the assets of that particular project. Therefore, the following are two incremental cash flows models namely, net present value and the internal rate of return.

Internal rate of return

The internal rate of return concept entails the process where the capital budgeting decision whereby if the internal rate of return is greater than the minimum return there is need to implement the project as it is profitable(Pae & Yoon,2012). On the other hand, if the project is low, the project will trigger losses and it is not recommended for one to implement it.

Meanwhile, the net present value is basically the difference between the present values of cash inflows and the outflows over a very long period of time (Pae & Yoon, 2012). This is applied in capital budgeting and the investment in analyzing the profitability of the project in the investment. If the project ahs net value, it is recommended that it will yield positive results and the converse is true.

References

Habib, A. (2011). Growth opportunities, earnings permanence and the valuation of free cash flow. Australasian Accounting, Business and Finance Journal, 5(4), 101-122.

Pae, J., & Yoon, S. S. (2012). Determinants of analysts’ cash flow forecast accuracy. Journal of Accounting, Auditing & Finance, 27(1), 123-144.

Sayari, N., & Mugan, F. N. C. S. (2013). Cash flow statement as an evidence for financial distress. Universal Journal of Accounting and Finance, 1(3), 95-103.

Venkata work:

Incremental Cash flow

Incremental cash flow is generally referred to as cash flow that is acquired by a company when it starts a new project. Generally, the capital budgeting decisions are made by comparing initial project investment outlay to the project’s future incremental cash flows and its terminal cash flow. To estimate incremental cash flow, businesses must compare the projected cash flow when it takes on a new project and if it doesn’t, putting into consideration how accepting such project may affect the cash flow of another part of the business (Incremental Cash Flow, n.d). this phenomenon is also called as “cannibalization”.

Accountants often forget another cost in computing incremental cash flow, which is the opportunity cost, which refers to a business’s missed chances for revenues from its assets (Tuovila, 2019). Positive incremental cash flow is a good sign that the investment is more profitable to the company than the expenses it will incur. Incremental cash flow can be an excellent tool to assess whether to invest in a new project or asset, but it should not be the only resource for determining the new venture. In the way of allocating costs to each corporation administration, accountants will always give costs to capital budget projects. Some of those costs may be applicable for managing cash flows, but others aren't. Since financial analysts are concerned with incremental cash flows, they should include any unique indirect additional costs that the project creates in their calculations. However, if the company would have incurred costs regardless of the project, they should not be included in cash flow calculations (Garcia, 2020). For example, costs of office space shared buildings, and executive salaries are probably not affected by the project and should not be included in these calculations.

Cash flow analysis is also involved with analyzing future costs, and it will not be involved with the past ones. Analysts must be careful to exclude sunk costs from any cash flow estimations. Even if the sunk costs appear relevant to the project, they shouldn't be included if they occurred before the investment decision (Garcia, 2020). For instance, a company may have paid for all the marketing tests a while back to discover the viability of new products they want to invest in. Even though it might seem relevant to the actual product investment, sunk costs shouldn't be incorporated in the initial cash outflow decision.

References

Incremental Cash Flow. (n.d). Retrieved on  September 10, 2020, from : https://corporatefinanceinstitute.com/resources/knowledge/accounting/incremental-cash-flow/

Garcia. M. (2020). Difficulties in Determining Incremental Cash Flows. Retrieved on September 10, 2020, from: https://smallbusiness.chron.com/difficulties-determining-incremental-cash-flows-81579.html

Tuovila. A. (2019). Incremental Cash Flow. Retreived on September 10, 2020, from : https://www.investopedia.com/terms/i/incrementalcashflow.asp

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Charnjeet work:

Cloud computing, a relatively modern concept, has brought forth several legislative issues predominantly attributing to governance and jurisdiction. Ahmad (2011) describes cloud computing as an assortment of technologies intrinsically linked to each other. One cannot deny the use and popularity of cloud computing on a global scale. The global nature of cloud computing has become problematic since the data can move freely within the cloud blurring the jurisdictional boundaries. Applying state or federal laws to cloud computing is complicated owing to a lack of unified law. Some States allow their people to withdraw from taking on the responsibility whereas others try to do the opposite.

Such varying regulations and policies necessitate politics as a contributing factor for the adoption of cloud computing. Avram (2014) articulates that for cloud computing to become a global tool without any borders, politics must be ruled out. For instance, Canada stopped the use of computers that are working on the U.S. borders over a global network because of the USA Patriot Act. This is due to the possibility of getting their data stolen that is stored within those computers. However, businesses must learn to deal with the changes in political climate across the world. On a similar note, Hans Szymanski, CEO NFON, a cloud telephony provider, said, “It is easy to use Brexit as an excuse to hold off making important growth decisions, but ultimately the challenges and opportunities are largely similar, no matter what the political and regulatory climate. Cloud is boundless” (Milman, 2017).

The businesses must seek out better opportunities even in the changing market conditions to continue with their business growth. Politics does play a massive role in determining a business’s fate. It would be best for everyone if politics is kept out of cloud computing because it may indirectly affect a whole state, and ultimately, the country. There is a credibility gap among the nations today and this jeopardizes the peace and security across the globe which most of them are ill-equipped to handle. On the same subject, Rob Sparrow, a philosopher and professor at Monash University, during an interview had said “The moment you start saying that technology is the most powerful force today, then what you have done is argue that people have a right to shape how technologies are developed and used. In practice, this means consciously trying to shape technological trajectories, it means setting research agendas, it is to direct foreseeable technologies, to articulate uses that might benefit the majority and not the few; placing the technology inside of democratic politics” (Kavanagh, 2019).

IT leaders and professionals are vexed at the non-ending governance issues concerning the cyberspace and IT. More importantly, with the emergence of multi-cloud strategies, companies are even more concerned about the political influence on cloud computing. Concerning the multijurisdictional issues over cloud computing, Patrick Mungovan, vice president of strategic programs at Oracle Public Sector, had said “We hear lots of talk about multistate community clouds, but we have not seen a whole lot of activity yet. The cloud is not a panacea, and it doesn't reduce the complexity level of things like procurement” (Raths, 2014).

Progress remains gradual in terms of internet governance over multiple jurisdictions. However, many countries have been making an effort to build their frameworks for multijurisdictional cloud computing by separating the already fractured Internet.

References

Ahmad, R., & Janczewski, L. (2011). Governance Life Cycle Framework for Managing Security in Public Cloud: From User Perspective. 2011 IEEE 4th International Conference on Cloud Computing, 372–379. doi: 10.1109/cloud.2011.117

Avram, M.-G. (2014). Advantages and Challenges of Adopting Cloud Computing from an Enterprise Perspective. Procedia Technology, 12, 529–534. doi: 10.1016/j.protcy.2013.12.525

Kavanagh, C. (2019, August 28). New Tech, New Threats, and New Governance Challenges: An Opportunity to Craft Smarter Responses? Retrieved January 29, 2020, from https://carnegieendowment.org/2019/08/28/new-tech-new-threats-and-new-governance-challenges-opportunity-to-craft-smarter-responses-pub-79736

Milman, R. (2017, November 1). Expanding your cloud business in Europe post-Brexit. Retrieved January 29, 2020, from https://www.cloudpro.co.uk/leadership/cloud-essentials/7143/expanding-your-cloud-business-in-europe-post-brexit

Raths, D. (2014, August 6). How the Cloud is Changing Everything for Government IT. Retrieved January 29, 2020, from https://www.govtech.com/computing/How-the-Cloud-is-Changing-Everything-for-Government-IT.html

Dushyanth work:

Cloud Computing and Politics

For cloud computing to become multi-jurisdictional, it must be separated from politics.         

            The statement shows that firms have to be wary of their investment into the internet. The reason being, the internet keeps on evolving and increasing firm’s complexities (Nelson, 2009). For instance, most firms are in the cloud computing phase. “This phase, called Cloud computing, includes activities such as Web 2.0, Web services, the Grid, and Software as a Service, which are enabling users to tap data and software residing on the Internet rather than on a personal computer or a local server” (Nelson, 2009).  Therefore, the firms are likely host all their data into the cloud.

The assertion also shows that approximately 90 % of firms will soon invest in the cloud. The investment ensure that the firms amass data from all over the world (Nelson, 2009). It also raises the issue of compatibility of the firm’s applications to the cloud. Moreover, the firms get exposed to legal, economic, and security issues. The cloud exposes the firm’s data to third party attackers. It also ensures the firms compete with global firms for the consumers.

The discussion confines itself with the legal issues. The issues necessitate firms and government formulate highly effective public policies (Nelson, 2009). They also allow firms understand the cloud computing phases. “In phase 1, computers were standalone devices in which software and data were stored; typical applications were word processing and spread sheets” (Nelson, 2009). Phase 2 ushered in the development of World Wide Web and firms access web browsers.

Phase 3 involved incorporating data and software into the web. Therefore, firms could execute their activities in several jurisdictions (Segall, 2013). Each of the jurisdiction has its rules and regulations.  Firms strive to comply with all the rules in the jurisdictions. The author stated that, “As the SWIFT incident demonstrated earlier, the multi-jurisdictional nature of cloud computing creates issues for determining what state or country may have access to data stored on a server” (Segall, 2013). Therefore, the more the countries, the more the legal issues.

Separation of politics from cloud computing reduce the number of issues. For example, “The Federal Rules of Civil Procedure dictate that a court must be able to exercise personal jurisdiction over a defendant for that defendant to be properly brought before the court” (Segall, 2013).  The court requires the goodwill from all the states to ensure its ruling is multi-jurisdictional. It has to seek international rules regarding the case under investigation. Thus, if the United States’ rules aligned with those of other nations, solving the cases would be very easy (Segall, 2013). It could have increased the speed of solving the Yahoo! Inc. v. La Ligue Contre Le Racisme et L’antisemitisme (“LICRA”) case.

State laws should enhance investment into cloud computing applications. They should ensure that the globalised technology has globalized regulation (Dannatt, 2012). The rules on cloud computing tend to differ from one state to the other. “Prior to this, it was usually clear what State law and action came under; however, the growth of things such as Cloud computing have created a plethora of issues” (Dannatt, 2012). The growth of cloud computing should not have led to the complexities. Countries have to eliminate politics and collaborate in the control of cloud computing operations. They have to forsake the State balance of power and streamline technological development.

References

Dannatt, G. (2012, September 14). How Cloud Computing Complicates the Jurisdiction of State Law. E-International Relations

Nelson, M. R. (2009). The Cloud, the Crowd, and Public Policy. Issues in Science and Technology, 25 (4): np

Segall, S. (2013). Jurisdictional Challenges in the United States Go Jurisdictional Challenges in the United States Government’ ernment’s Move to Cloud Computing Technology. Fordham Intellectual Property, Media and Entertainment Law Journal, 23 (3): pg.1107- 1151