Question

Analyze and Elaborate on the topic of Selection Equiptment in Corporate Finance

Answer 1

ANS: Corporate finance is the division of finance that deals with the funding sources, capital structuring, Investment decisions etc. It is primarily concerned with maximising shareholders value through long & short term financial planning & implementation of various strategies.

Selection of Equipment is very crucial in corporate finance as the selection of suitable work equipment can reduce or eliminate many risk & it generally much easier & cheaper to start with the right equipment than to modify it later.

Selection of right equipment can improve the business process, production capacity & on the other hand it also saves time & cost.

On order for right selection of equipment, following points to be kept in mind -

1. Investment in new equipment is done only when there is substantial increase in productivity.
2. Whether upgrading old machine, instead of buying equipment gets a better performance.
3. whether new equipment is compatible with the market format.
4. Management should take decision regarding buy or lease the equipment.
5. Follow a technology road map that aligns with the business strategies.

Apart from above, corporate finance shall also consider the following cost factors -

• Equipment purchase price & transportation cost
• Installation cost
• Operating & Maintenance cost