Capital investment analysis for the small business

Article Abstract:

Small businesses often must consider how to manage capital investments to maintain profitability and liquidity. A new proposed method which can be used is the discounted payback period (DPP) which measures the time required to completely recover both the first cash outlay and the opportunity cost of funds a business may lose as a result of capital investment. DPP is governed by three rules: the discount rate used with DPP should be related to a firm's liquidity position; financing costs and cash flows should include after tax debt service costs; and the selection of a maximum cutoff point should be based on a firm's particular situation. A case study of a printing firm is presented to illustrate how the DPP method can be applied.

Analysis, Budget, Budgeting, Budgets, Capital investments, Liquidity (Finance)

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The value of outside directors: myth or reality?

Article Abstract:

The value of outside directors to small, privately owned businesses has been greatly exaggerated. Over 400 respondents of a survey of Inc. magazine's 500 'best' firms indicated that there were only two areas where outside board directors were valued: for capitalization, and for giving reassurance that the board would find a replacement should the CEO become disabled. Outsiders were not preferred in other areas such as budgeting or crisis management. Outside directors seem to be of less value because they lack intimate knowledge of the firms they serve, and are not around when needed.

Evaluation, Corporate directors, Surveys, Inc. (Periodical)

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