A Strategic Investment Decision Model for Maximizing Financial Performance: With a Case of Dry Bulk Shipping Business
Journal: THE INTERNATIONAL JOURNAL OF BUSINESS MANAGEMENT AND TECHNOLOGY (Vol.2, No. 4)Publication Date: 2018-07-30
Authors : Weon Jae Kim;
Page : 75-79-79
Keywords : Investment decision model; Operational and financial risks; Assetplay; Secondhand ship market; Freight marketcycle;
Abstract
This paper deals with a managerial decision to maximize net income for shipping business characterized by both high operational and financial risks. Particularly, dry bulk carrier shipping business has shown repeatedly dramatic market cycles since year 1980. This case analysis for dry bulk shipping business is attempted to verify the effectiveness of proposed investment decision model in terms of financial performance for a specific period where the freight market experienced another huge business cycle. Since the tramp shipping business is capital-intensive and high risk industry, managers are required to avoid these business risks and maximize business profit consisting of operational income and capital gain by asset play. In essence, the managers are required to make timely and rational decision in both sale and purchase of their ships. There are three alternatives in investment on shipping business: i.e. chartering, second-hand ship, and new shipbuilding. This case study assumes that a shipping company is able to choose the alternatives of chartering and purchasing second-hand ships in their investment decision because the new shipbuilding requires at least 2 years for delivery and operation. The financial results of case analyses under dynamic business environment and condition reveal that the managers must pay keen attention to secondhand ship market greatly depending on freight market showing recession, recovery, boom, and collapse. In sumshipping company has to buy a ship at the lowest price during the recession stage and sell it at the highest price during the boom stage and put a chartered ship into the service line for customers rather than keep operating the ship for the whole freight market cycle in which the company has no choice but to suffer a huge loss due tohigh operational and financial costs as well as to sharp decrease in revenues.
Other Latest Articles
- A Social Marketing Approach to Safer Driving in Nigeria
- An Empirical Study on the Effect of Retail Service Quality Attributes on the Consumer Buying Decision - With Reference to Moustache
- The Technology Adoption of Jajar Legowo System and Direct Seeding System on Rice Farming in the Village of Duria Asi, Wonggeduku District of Konawe Regency, Indonesia
- The Effect of Internal Control by using COSO Framework on Revenue Toward Employee Performance: A Case Study in Public Hospital of South of Tangerang, Indonesia
- Partial Least Square (PLS) Model Investigation for Determining Influencing Factors of Entrepreneurship Collaborative Learning Effectivenessin Indonesia Higher Education
Last modified: 2018-10-06 14:41:15