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Hi ken, i have a doubt regarding question 3 of M/J 22 on Breac case study and need ur help on how VBM would affect performance measures like manufacturing and advertisement.
Thanks & regards
I don’t have access to this question as it is only available on the Practice Platform. However, this technical article might be of some help:
Yes Ken, i have already gone through this article but i think it did not cover how VBM could impact other measures like manufacturing (eg % of goods returned or stockout) and marketing spend ( eg % of marketing spend).
It won´t cover very specific effects, but the thrust is how other measures might be used to maximise the NPV of future cash inflows.
So, if lots of goods are returned, there will be an adverse cash flow effect: cost of processing, perhaps the cost of scrapping goods, perhaps loss of customers.
Marketing spend means spending now (outflow at time 0) in the hope of increased inflows in the future. It´s only worthwhile if the NPV of the incremental cash flows is positive.
It,s not so much that VBM affects other measures (they will be what ever they are) but how other measures might or might not be useful in maximising value and how they should be interpreted. The focus is always on maximising the present value of future inflows.