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Qualitative Factors
Once again, we cannot expect to make adequate decisions
based on purely financial appraisals, even where those appraisals are
based on sound financial theory. Also, the extent to which all relevant
factors can be adequately quantified and forecast over a period of several
years is a major limitation to the application of sound financial appraisal
techniques. Long-term strategic considerations are intimately linked
with capital investment decisions with important decisions about, quality,
technology, marketing, personnel, training etc. all having long-term
indirect effects to be taken into consideration in addition to the directly
quantifiable aspects of an investment decision. (See "Relevant
costs and Revenues" for comments on qualitative factors.)
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In addition to the technical difficulties
in determining the necessary data inputs, major investment decisions are
likely to be fraught with competing political interests and concerns (like
those just indicated above) about perceived performance of the company
or of individual managers. In your future careers as professional engineers,
you are likely to find yourselves competing for capital expenditure within
this type of complex environment of conflicting interests, and will find
a sound understanding of the role and limitations of accounting information
a vital aid in putting across a winning argument.
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