Financial Management: Investment Appraisal Techniques and Market Efficiency

Financial management

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Critically evaluate the benefits and limitations of each of the different investment appraisal
techniques...............................................................................................................................3
2.Determine market efficiency using three different strength................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
In the below report, the process of financial management is determined with the help of
planning, organizing, controlling and directing. Financial management includes investment
appraisal techniques which are used in future decision making (Zaimi., 2020) . The techniques
include payback period, Net present value and Accounting Rate of Return which is explained
below including evaluation. In this following report, market efficiency is also described using
three different strengths; weak form, semi-strong form, and strong form. These market
efficiencies are also critically evaluated in the following report.
MAIN BODY
1. Critically evaluate the benefits and limitations of each of the different investment appraisal
techniques
Investment Appraisal Techniques:
Investment techniques are a combination of methods used to determine future profits and losses
from investments and projects. These techniques help in choosing an investment which generates
future profits for the firm. Investment techniques are characterised by two parts, one is
discounted techniques and another is non-discounted techniques (Centobelli, Cerchione and
Ertz., 2020) . Discounted techniques include Net present value (NPV), Internal Rate of Return
(IRR) whereas non-discounted techniques include a Payback period . These techniques plays
important role in decision-making and maximise the profitability of a firm from their new
investments. It helps in reducing investment risks and maximising shareholder value . Investment
appraisal techniques help in measuring return on investment with qualitative and quantitative
information.
Evaluation of various Investment appraisal techniques are as follows:
i. The Payback Period:
The payback period refers to the time duration taken by an investment to recover
its cost. The payback period is the length of time investment needs to reach its
break-even point. Break-even is the situation of no profit and no loss. A shorter
payback period refers to a more suitable investment, while longer pay back period
refers to less desirable investment. Finance manager uses payback period to