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Moult Hall, Case Study Example

Pages: 17

Words: 4642

Case Study

After reviewing the case study of Moult Hall, it is clear that there are two options on how the hall could be renovated for future use. The first idea is Winston’s proposal. Winston proposes that Mould Hall be used as a quad bike course. This would be a trendy attraction and could serve as a serious money maker. The second idea is Jonathan and Ingrid’s proposal. Jonathan and Ingrid would like to propose to convert Moult Hall into a hostel for disadvantaged youngsters of society can dorm and learn about the history of the land. Both of these proposals are good ideas and both have the potential of generating enough money to keep the Moult Hall in full operation. Both proposals are attached with financial forecast of how the projects would ideally be funded. However, only one proposal can be selected and the proposal with the highest return on investment that carries the least risk will most likely be selected.

We can first look at Winston’s proposal. Winston’s proposal is based on a fixed income of 750,000 Euros per year. Investment instruments are fixed-income debt issues of states and companies aimed at a broad market. They are usually issued by governments and corporate bodies of great financial capacity in defined quantities involving an expiration date.

Fixed income works exactly the same way as a bank loan, but has some peculiarities. Lenders are a great number of investors, which are called debenture holders. The debt is represented by securities traded on the stock exchange, so that the investor can go to the market and sell its stake to recover your investment quickly.

In exchange for its capital, investors receive a interest every time, although in fact it is more complicated the determination of the rate of gain of this type of instruments, given that it requires the calculation through mathematical formulas and financial that relate to the purchase of those instruments through a discount offered in the market. Once made the acquisition of such instruments with discount, the instrument will be able to offer a higher price. For the issuer of the securities represents a source of funding cheaper than through banks because it avoids the intermediation and spreads the risk.

Fixed-income assets, also called “bonds” are debt instruments issued by entities such as Governments, provincial, municipal or private companies that sell these to other entities or individuals. The bonds give the owner the right to charge for the interest and principal in the future, as well as any other law established in the prospectuses. Its most outstanding feature is that its profitability, obtained by the charging of interest, is determined for the entire life of the emission, which does not mean that they will always the interest rate will be fixed or constant throughout the life of the government.

Fixed-income assets or bonds usually pay an interest on a regular basis; the contractual rate of interest is called a “coupon” and in the majority of the cases are usually returned the capital to maturity (modality bullet) even though there are also bonds with amortization schedule of the sectors.2 Also there are bonds that do not pay coupon interest, known as “zero coupon bonds”, such is the case of the letters of the treasury and the promissory notes of Companies in which the performance is generated by the difference between the purchase price and the redemption value.

Winston shows in the calculations that his proposal may generate profit in the form of fixed income. His profit generated after all costs would amount to 402,250 Euros. Considering that the calculations for Jonathan and Ingrid are only calculated for years 1 and 2, they seem to be making more of a short term investment than Winston.

Short-term investment strategies are fairly simple because the securities in a working capital portfolio are limited in type and are much shorter in maturity than a longer-term portfolio. Most short-term investors seek “reasonable” returns and do not want to take on substantial risk. Short-term investment strategies can be grouped into two types: passive and active. A passive strategy is characterized by one or two decision rules for making daily investments, whereas an active strategy involves constant monitoring and may involve matching, mismatching, or laddering strategies. Passive strategies are less aggressive than active ones and place top priority on safety and liquidity. Yet, passive strategies do not have to offer poor returns, especially if companies have reliable cash forecasts. Often, companies with good cash forecasts can combine a passive strategy with an active matching strategy to enhance the yield of a working capital portfolio without taking on substantially greater risks.

The factor that is used to annualize the yield depends on the type of security and the traditions for quoting yields. For example, the money market yield is typically annualized using the ratio of 360 to the number of days to maturity.

Winston surely appears to have this proposal well planned out. Having the Moult Hall opened for 50 weeks out of the calendar year would hopefully attract customers he charges 1,900 Euros per week for. Expenditures are well planned out on the annual revenue expenditures sheet and the hope of income should be enough to cover them over for profit. Before any further analysis on this proposal, we can take a look at Jonathan and Ingrid’s proposal.

Jonathan and Ingrid’s proposal is based on benchmarking as compared to the Johnstone House. The benchmark is a point of reference used to measure the performance of a financial asset or a product with respect to a standard instrument or with respect to the competition.

The word that comes from the English and that means ‘reference point’ or ‘parameter’, it is a financial indicator used as comparison tool to assess the performance of an investment. Benchmark is a term derived from english which literally means “reference point” or “parameter”.

The use of this word has spread throughout the world for naming technique of comparison between two or more products in different areas of knowledge such as computing, the sciences, social sciences and finance. Each field, however, understands by benchmark something slightly different.

In the field of business for example, it is the systematic process of continuous evaluation of the products and services offered by the company, with the aim of improving the quality.

In economics the noun stems in verb: benchmarking, which consists of a technique of comparison that seeks to improve the competitiveness of domestic markets to perform comparative studies of the performance of various companies with a series of variables, coefficients and default flags.

In the benchmark financial language refers to the “witness market”, that is, to the point that serves as a reference for measuring the performance of the investments that are made. This is called the financial instrument used as a parameter to evaluate the efficiency of the management of a financial portfolio compared with emissions of the same type or in the same market.

In regard to Jonathan and Ingrid’s proposal, the use of benchmarking may carry both benefits as well as limitations. Jonathan and Ingrid are proposing to use the Moult Hall as a new hostel, so one of their benchmarks might be to study the surrounding areas to calculate how many tourists travel through the area on a seasonal basis. This would be necessary because it would be a shamed to invest so much into a new hostel just to learn that there are no tourists traveling in the area. Another way to improve their benchmarks might be to compare the prices of surrounding hostels in the area. Jonathan and Ingrid would need to make their proposed hostel unique so that the customers choose to stay at the Moult Hall hostel instead of other hostels.

Count with default parameters is of crucial utility to measure the projected and actual performance of our investments. When we decided to invest the surplus revenue we must take into account many factors, so the benchmark can help us to decide with more ease. Know the existence and value of the various economic indices of our country allows us to better understand how they operate investments that provide banks and other financial institutions.

Remember that it is always important to have recourse to a professional, especially when our investments are risky or large and we have doubts about this or any other topic such as the proposals by Winston and Jonathan & Ingrid.

In finance, can be used as a benchmark stock index, such as the Ibex 35, to measure the performance of the portfolio of a investor of Spanish equities and know if you have obtained more profitability that this index, or on the contrary, he would have been more profitable to invest directly in the Ibex 35, through a financial derivative, as for example an ETF.

The benchmark will be chosen depending on the market that this investment-oriented, even can be used as a benchmark a combination of multiple indexes, if the investment is focused on several markets.

Therefore, the benchmark of an investment fund will be the reference index used to compare the behavior of this fund in comparison with a standard background in a framework of time. In this way, you can determine if the fund manager has obtained profitability through its ability to investment. The investor is useful to know if you are interested in investing in the investment fund, or on the other hand, investing directly in the benchmark, thus reducing their costs of management.

In this way, each fund or investment company is based on a benchmark that best meets their objectives. Among the advantages that we cannot attribute to the use of this technique is that it helps to define the destination of the investment and that through this the investor is done with a tool that compares and evaluates its current performance and historical. Specifically, he is called to the Benchmark tool that attempts to achieve efficient behaviors in the markets of monopolies and consists in comparing the performance of these companies through various metrics.

It is used to perform a comparative analysis of the products or services offered by the competition, made in order to improve an existing product or design one new in any sector. This study seeks to orient or technical best practices and strategies for the purpose of aim to the continuous improvement and client-oriented.

This essential tool helps to know what the competition, thus adapting to the particular needs of the company, to carry out the relevant settings depending on the circumstance and the momentum of the company or organization.

While traditionally the ‘benchmarking’ has been limited to large enterprise organizations, currently is also used in the public service in many countries with the aim of improving processes and systems and evaluate the implementation of policies and management strategies for the city, province, or community. The results have been obtained as a result of using this tool in the public sector show the development of more effective and efficient services.

It is important to consider how the balanced scorecard might be used to measure the Moult Hall’s performance. In general, the financial indicators are based on the company’s accounts, and the last show of the same. The reason is due to the fact that the accounting is not immediate (by issuing a supplier an invoice, it is not posted automatically), but that must be made closures to ensure the compilation and consistency of the information. Because of these delays, some authors argue that direct a company paying attention only to financial indicators is like driving at 100 km/h by looking through the rear view mirror.

“This comment is exaggerated because there is a tool called budget that is held annually and are adjusted every three months, introducing projected financial statements with margin of error of 5 to 10 %.

What is possible, is to use the WCC as an additional tool to view in a better way the strategies used in the projected budget.”

This perspective covers the area of the needs of the shareholders. This part of the BSC focuses on the requirements of creating value for shareholders as: earnings, economic performance, the company’s development and profitability of the same.

Economic Value Added (EVA), return on capital employed (ROCE), operating margin, income, asset turnover are some indicators of this perspective of Jonathan and Ingrid’s proposal.

Some indicators are frequently used:

  • Index of liquidity.
  • Index of debt.
  • DuPont methodology.
  • Index of return of capital invested (in most cases).

To achieve the financial performance that a company wishes to, it is essential that you have loyal customers and satisfied. With that goal in this perspective are measured the relationships with the customers and the expectations that they have on the business. In addition, in this perspective are taken into account the main elements that create value for customers by integrating them into a value proposition, so that you can focus on the processes which for them are more important and more the meet.

The customer perspective, as its name indicates, is focused on the most important part of a company: its customers, because without consumers there is no type of market. Therefore, it must meet the needs of the buyers among which are the prices, the quality of the product or service, time, function, image and relationship. It is worth mentioning that all perspectives are united among themselves. This means that in order to meet the expectations of shareholders should also cover the consumers to buy and generate a profit. Some indicators of this perspective are: customer satisfaction, deviations in service agreements, claims resolved on the total of claims, and incorporation and customer retention.

Knowledge of the clients and the processes that generate more value is very important to ensure that the financial picture is prosperous. Without the study of the peculiarities of the market, which is focused the company may not be a sustainable development in the financial perspective, because it is largely financial success comes from the increase in sales, a situation that is the effect of repeat customers because they prefer their purchases the products that the company develops taking into account their preferences.

A good way of measuring or know the client’s perspective is designing protocols of basic care and use the methodology of client incognito to the relationship of the personnel in contact with the customer.

Analyzes the adequacy of the internal processes of the company prior to the acquisition of customer satisfaction and the achievement of high levels of financial performance. To achieve this goal is proposes an analysis of the internal processes from a business perspective and a predetermination of the key processes through the value chain.

There are four types of processes:

Processes of operations: developed through the analysis of quality and reengineering. The indicators are those relating to costs, quality, time or flexibility of the processes.

Processes of customer management. Indicators: selection of customers, customer acquisition, retention and growth of customers.

Innovation processes (difficult to measure).  Example of indicators: percentage of new products, percentage patented products, introduction of new products in relation to the competition …

Processes related to the environment and the community. Typical indicators of environmental management, occupational health and safety, and Corporate Social Responsibility.

Indicators: strategic databases, proprietary software, patents and copyright (trademarks), among others.

At the moment, due to the turbulence of the business environment, influenced in most cases by a large competitive pressure, as well as by a boom in technology – is when you start having a wide significance.

The concept of scorecard derives from the concept called “tableau de bord” in France, which, translated literally, would mean something like dashboard or instrument panel. The Scorecard becomes, in addition to a practical concept, an idea academic, since until then the business environment did not suffer from large variations, the trend of the same was stable, the decisions made were of a high level of risk.

By then, the basic principles on which it was argued the Scorecard were already structured, that is to say, were fixed ends in the entity, each of these were carried out using the definition of a few key variables, and the control was carried out through indicators.

Basically, and in summary form, we can highlight three fundamental characteristics of the control panels:

The nature of the information collected in the, giving a certain privilege to the operative sections (sales, etc. ) to be able to inform the sections of a financial nature, the latter being the product resulting from the other.The rapid rise of the information between the different levels of responsibility. The selection of indicators required for decision making, especially in the lowest possible number. Ultimately, what is important is to establish a system of signals in the form of Scorecard that tells us the variation of the magnitudes truly important that we must be vigilant to submit control management.

At the time to develop the control panels, there are many criteria that you can intersperse, being the described below, some of the most important, to classify such tools to support decision-making: The time horizon.

  • Levels of responsibility and/or delegation.
  • The areas or specific departments.
  • Other classifications:
  • the economic situation.
  • The economic sectors.
  • Other information systems.

At the present time, not all the balanced scorecards are based on the principles of Kaplan and Norton, although influenced to some extent by them. For this reason, it is typically used with a certain frequency the term dashboard, which relaxes some theoretical characteristics of the control panel. Generically, a dashboard encompasses a number of tools that show information relevant to the company through a series of performance indicators, also known as KPIs (key performance indicators).  It should be noted that a “dashboard” may not be balanced, a term that evokes the “balanced” Scorecard, i.e. a balance between indicators that displayed the way across the organization or company and that perhaps, for a “dashboard” you can only find and turn their gaze to a targeted set of indicators and partial.

Six will be the proposed stages:

  • Analysis of the situation and getting information.
  • Business Analysis and determination of the general functions.
  • Study of the needs, according to priorities and informational level.
  • Signs of the critical variables in each functional area.
  • Establishment of an effective and efficient correspondence between the critical variables and the precise measures for their control.
  • Configuration of the control panel depending on the needs and the information obtained.

In a first stage, the company should know what is the situation, assess the situation and recognize the information with which you are going to be able to count in each moment or scene, both of the environment such as that handles usually.

This stage is closely linked with the second, in which the company will have to clearly define the roles that made up in such a way that can be studied the needs, according to the levels of responsibility in each case and be able to conclude which are the information priorities that have been filled, committed to be carried out in the third stage.

On the other hand, in a fourth stage have been marking the critical variables necessary to control each functional area. These variables are certainly different in each case, either by cultural and human values that permeate the philosophy of the company in question, or either by the type of area that is being analyzed. What is important in any case, is to determine which are the most important in each case to carry out a correct control and an adequate decision-making process.

Later, and in the penultimate of our stages, has been to find a logical correspondence between the type of critical variable determined in each case, and the ratio, value, measure, etc. , to report to us your state when this proves necessary. In this way we be able to give a correct control of chaos. On the basis of the cause-effect relationships, it develops a strategic map (although the literal translation of Strategy Map is Map of the strategy) that allows you to see nimbly the evolution of the indicators and take action to change them.

In last place, you must configure the control panel in each functional area, and at each level of responsibility so that hostel provided minimal information, necessary and sufficient to be able to draw conclusions and make the right decisions.

In regard to creating the balanced scorecard for the chosen proposal, we would chose Winston’s proposal. Winston’s proposal appears to have a more solidified plan for investments and the coverage of expenditures. Winston’s proposal also does not require any serious renovation of the Moult Hall; as where Jonathan and Ingrid’s proposal requires much renovation for the installment of a new hostel. So, in order to make an appropriate balanced scorecard, we would first decide the performance measures.

The word performance will be used in this work with a broader meaning than productivity. While productivity relate the results of the operations with the inputs required to produce them, the performance-as we see here- measures many other concepts in addition to productivity, such as the degree of fulfilment of the clients’ expectations by part of the signature, the quality of your working life and the quality of their products and services. If productivity is related to the efficiency (how well resources are used), the performance is related to the effectiveness (how well it meets the demands of the customers).  Performance measurement is “the process of quantifying the action, where the measurement is the process of quantification and action leads to performance”.  Thus, a system of performance measurement is then a set of metric used to quantify the action.

There are several reasons for the popularity that the measurement of performance has been achieved in recent decades. These include: the dynamic nature of the contents of the work ( “changes what people” ); the greater competition between the companies, the business improvement initiatives such as quality management; national and international awards for the quality; the organizational roles, which are changing; the external demands on companies, they are also changing; and the potential of computer-based technologies.

Traditionally performance measures have been financial. Increasingly, however,these measures alone are considered insufficient. One of the main concerns of the managers is that, often, the financial reports do not support investment in new technologies and markets, and this investment is compulsory for the progress of the companies. Corporate balance sheets show historic measures, but do not indicate the yield potential of technological opportunities and future trading. When the measures are developed financial markets and products were much more simple than those of today. Finally, the financial measures tend to focus on the short term: the short duration of the employment in the same company of chief executives, coupled with the Practice of manipulating the accounting numbers, strengthened by some short-term expectations to be useful, a system of performance measurement must be in harmony with the policies of the signature and must be applied consistently to conduct its strategy. You must also be multidimensional, to capture the various aspects of a company, its products and its services. Approaches such as the dashboard command and the multiple dimensions of quality were introduced to deal with the complexity of measuring the efficiency and effectiveness. To finish this section, we highlight the importance of considering to performance measurement as part of the management of information within the cycle of continuous improvement cycle or the standard job ( Standard-Do – Check-Act ).  The cycle of continuous improvement leads to the development of the quality of a product or process is an improvement plan (Plan), it takes you to the practice (OJ), verified their results (Check) and acts accordingly (Act), either by implementing the new shape of the product or process if the plan proved successful or continuing with a new plan of improvement in the opposite case. The cycle of work standard, for its part, assumes that there is a standard (Standard) on which the work will be carried (OJ), permanently verifying the results of the work (Check) and acting accordingly (Act), in other words, continuing with the current standard if the results are satisfactory or improved with the PDCA cycle if they are not. Note that both in the PDCA cycle as in the SDCA cycle there is a instance of verification in which the measurement of the performance plays a central role.

An important component of the quality movement is benchmarking, that is to say, “a comparison of processes and outcomes that represent best practices and the best performance for similar activities, they may be in the same business sector to which the Organization belonged or in any other”. The comparison of processes and outcomes is performed through financial and non-financial measures, and the latter are the most important for continuous improvement. The impact of the benchmarking is largely psychological, as the directors and employees are made aware of the possibilities of the processes and change their attitudes. In addition, the benchmarking allows organizations to set targets based on specific data, rather than on the basis of intuition; facilitates the implementation of the process improvements; and increases the degree of awareness about the benefits of the new technologies.

The benchmarking involves the following: (1) the company knows about their operational strengths and weaknesses; (2) the company knows its competitors and the leaders of their industry; and (3) the company is determined to incorporate the best methods to win superiority, imitating and overcoming the force of the leaders of the industry.

These assumptions make mandatory the design and use of a solid system of performance measurement. The control measures are generally simple, physical (non-financial), frequent and easy to understand. At the other end of the spectrum, the steps for planning are complex, financial and infrequent. We can condense the method of Thor in the following steps:

(1) determination of what is measured. The organization must determine that it is important to measure, studying first and foremost its overall mission and the mission of each group that integrates, the characteristics of their customers (internal and external), and the nature of their products and services.

(2) Establishment of a ranking. The organization must establish then a ranking to determine, within the wealth of possible measures, which are the most important. This determination may be made by means of a committee, the head of an area or by participation of all, with appropriate methodologies.

(3) Integration of the measures selected. Regardless of the method of selection, the actions should constitute a family added that integrates a net result with individual measures.

Considering the performance measures in this balanced scorecard created for Winston’s proposal, it can be said with reasonable assurance that Winston’s plan for using the Moult Hall as a quad bike course will be a main attraction. There is money to be made with this plan and at the same time, the Moult Hall gets to be preserved. Jonathan and Ingrid’s proposal requires the hostel investment to break even, which does not seem so promising for profits. Here is a balanced scorecard of the chosen proposal by Winston.

Works Cited

Agostino, D. and Arnaboldi, M., 2012. Design issues in Balanced Scorecards: The “what” and “how” of control. European Management Journal30(4), pp.327-339.

Al-Hemyari, Z.A. and Alsarmi, A.M., 2015. Standards, Benchmarks, and Qualitative Indicators to Enhance the Institutions’ Activities and Performance: Surveys and Data Analysis. International Journal of Knowledge-Based Organizations (IJKBO)5(4), pp.37-61.

Ammons, D., 2014. Municipal Benchmarks: Assessing Local Perfomance and Establishing Community Standards. Routledge.

Bisbe, J. and Barrubés, J., 2012. The balanced scorecard as a management tool for assessing and monitoring strategy implementation in health care organizations. Revista Española de Cardiología (English Edition)65(10), pp.919-927.

Collis, J. and Hussey, R., 2013. Business research: A practical guide for undergraduate and postgraduate students. Palgrave macmillan.

Henderson, D., PricewaterhouseCoopers, L.L.P., Young, G. and Mittl, R., 2012. Balanced Scorecards: The Integration Point between Enterprise Information and Performance Monitoring.

Hughston, L.P. and Macrina, A., 2012. Pricing fixed-income securities in an information-based framework. Applied Mathematical Finance19(4), pp.361-379.

Mayle, J., Hoffman, K., Shaw, S.J. and Edelstein, P.H., Bonddesk Group Llc, 2013. Device, system, method, and computer medium for providing price evaluation on fixed-income securities in odd lot market and improving market confidence regarding the same. U.S. Patent Application 13/840,737.

Tucker, J., Head, A., McDonell, B., & Richardson, S. Moult Hall, 5–8.

Tuckman, B. and Serrat, A., 2011. Fixed income securities: tools for today’s markets (Vol. 626). John Wiley & Sons.

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