With companies sitting on vast reserves of cash, capital allocation decisions can have a major impact on individual company performances, as well as overall economic growth. Following up on AFP’s 2013 Cost of Capital Survey, AFP has released a new guide
that explores how firms calculate their capital cost and how FP&A professionals can partner with senior management in making important capital allocation decisions.
FP&A professionals are often the ones making, reviewing and recommending business case scenarios for potential investments. “What we see work best, is that it [the group that makes those recommendations] resides in FP&A,” said Jason Logman, principal, EPM Transformation Practice, The Hackett Group. “There’s a capital group that gets involved in each project above a certain dollar and materiality threshold. They’re typically responsible for managing that portfolio.”
Abnormally low interest rates are making cost-of-capital calculations more difficult, affecting critical capital allocation decisions. The difference between the right decision and the wrong one can have a significant impact on shareholder value. This new FP&A Guide covers the challenges of arriving at an accurate rate.Download the AFP Guide to Making Capital Allocation Decisions: The Role of FP&A here. AFP is also hosting a companion webinar on capital allocation decisions on February 20.