Essay Sample on the Topics: The Triple Downline Concept. NPV and IRR

Triple down the line and its effects on a company's profit

Sustainability plays a critical role in any business, government or non-profit organization. The management and the people who run these organizations always strive to ensure whatever they are doing is sustainable (Slaper & Hall, 2012). However, measuring the degree of sustainability can pose a challenge to the management. The triple bottom line is an accounting framework that measures the level of sustainability of a company by taking into accounts its profits as well as its impact on the environment and its social dimensions. The accounting framework has to ensure the planet the people and the profit are not in conflict. The ability to use the framework will ensure a company's profit grows because the employees will be well trained. It will also have an impact on the profit because the available resources are not exploited. A company can, therefore, be guaranteed of stable and long-term effects. An example of a company that has adopted the accounting framework is Starbucks which ensure its beans are ethically sourced.

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Profitability effects if companies follow corporate social responsibility

Corporate social responsibility is intertwined with the triple downline concept. A company that adheres to corporate social responsibility (CSR) takes responsibility for the community and the environment that it operates (Slaper & Hall, 2012). The efforts that these companies take go beyond what is required of them by environmental and other government agencies. The decisions taken are in-house and are meant to ensure there is sustainability. CSR is also referred to as corporate citizenship because of the cost that they incur without any immediate benefits on the company. The cost that such companies invest do no not bring financial benefits but ensure there is a positive environmental change. A company's profit can benefit from its actions because people are becoming aware of the actions taken by companies. Companies such as Starbucks give student loans as part of their corporate social responsibility. When such an information is available to the public there is bound to be brand loyalty. People will know that by supporting the company, they are having a change in people's live. Investors will also be willing to put their money in such a company because they believe in what they are doing. Corporate social responsibility may therefore not have short-term benefits, but it has long-term returns.

Question 2

Balance Scorecard

Purpose Statement

Be the best healthcare provider in the State

Incorporate our services with high-end customer care experience.

Ensure our clients get the support that they need from our staff

Strategic objectives

Increase the company profits.

Reduce the cost of healthcare by offering competitive prices.

Act as an agent between the patients and the needed support structure.

Question 3

Relationship difference between NPV and IRR

There are some similarities between the net present value and the IRR as both are used as techniques of making capital budgeting decisions. The aim of both these techniques is ensuring the best product is picked in case there are several available options. Both of the methods produce the same results although some people prefer one method over the other. The methods also use a five-step process when computing the type of project to invest in and the kind of returns that such a project is likely to bring.

Difference between NPV and IRR

The net present value as a measurement tool that is used to inform an investor when a certain project will achieve a certain target with a given amount of money. An investor who uses this method will get the quantified amounts that have been adjusted to achieve the target assuming everything remains constant. However, unlike the net present value, the internal rate of return tells an investor what the percentage rate earned is for each dollar that he/she invest in a project. An investor who uses this method, therefore, can come up with a decision about which project to pick based on the yield that each investment promises to bring if everything remains constant.

Superior method

There is no superior method between IRR and NPV. The reason is that both these methods provide an accurate measure of what an investment will bring. However, Internal rate of return is common than the net present value method. The simplicity of the reporting and the direct results have made this technique famous. The net present value is complex and has assumptions at every stage of the calculations. However, a project that has a lot of uncertainty with fluctuating discount rates and is long term is better off being calculated using the net present value method. It is possible to use both techniques when deciding which project is viable. However, long-term projects should be calculated using NPV while short-term and straightforward project should be calculated using IRR. Ultimately it is up to the investor to pick which method they find easy to use. As long as the right decision is made the method used to calculate viability does not affect return on investment.

References

Slaper, T. F., & Hall, T. J. (2012, May 5). The Triple Bottom Line: What Is It and How Does It Work? Retrieved from http://www.ibrc.indiana.edu/ibr/2011/spring/article2.html