FINANCIAL MANAGEMENT

Financial Management

Financial Management

Introduction

The economy of Hong Kong is market-driven rather than government-led, and its resilience has been repeatedly demonstrated. While the free market is Hong Kong's strength, prudent regulation of its financial markets, particularly its banks, is also a major advantage. The quality of Hong Kong's overall regulation is good, although there have been sporadic complaints about regulatory lapses. Recent analysis of the economy has of course been dominated by the repercussions of the financial turmoil that engulfed the world in September 2008 following the demise of Lehman Brothers (Europa World Plus, 2011).

With the onset of the international crisis, governments are required to realize that prudent regulation of financial markets is indispensable and that financial markets need transparency, accountability and suitable mechanisms to prevent excessive borrowing. Too often, the attraction of big short-term profits has prevented regulators from acknowledging the absolute necessity of simple rules (Shapiro, 2005). This paper presents an analysis of investment opportunity for a company in Hong Kong market driven by technical and technological uncertainty.

Part A

Memo to Task force for Meeting

To: Task Force Members

From: Senior Manager, XYZ Company

Date: December 3, 2011

Sub: Investment Project Evaluation

Dear Team Members,

Main objective of the meeting is to discuss and analyze the implications of project in potential importance for the future of organization profitability. Along with it, agenda of meeting also focus on examining the potential pitfalls of the investment in particular project. Hong Kong's role as a major technological centre is unlikely to change. Reflecting the transition towards a technology orientated economy is the changing composition of Hong Kong's total exports. Compared with 10 years previously, by 2010 Hong Kong's exports of services had increased by more than 140% in real terms (Europa World Plus, 2011).

The task force mainly comprise of economists, accountants and engineers who will propose measures to assist the management in addressing the problem of whether an investment should be made or not. Investment will be made in the innovative technological products manufacturing that will add on significant value to business of the company. It is considered to be good business opportunity; however, it has an estimated investment sunk cost of US$50,000,000, which is a subjective question on the proposal viability for success. If the project is effectively executed, it will result in increasing the annual turnover of company from US$500,000,000.

Task Force on proposal is expected to focus on areas that would benefit the company as important potential areas of future growth: testing and certification, and innovation and technology products manufacturing. This raise question on company's approach whether project should be pursued in the company's current core business and expected industry developments. Given its size and the high risks involved in such a decision, the company should study very carefully the investment project. Hong Kong market opportunities have relied on market forces to drive the economy, and non-intervention has been intended to serve a positive purpose, by promoting growth and efficient resource allocation. The company would intervene only rarely and only when such intervention might be expected ...