FINANCIAL CONSIDERATIONS IN PLANNING FOR PRIVATE MOTOR TRANSPORTATION

FINANCIAL PLANNING FOR INVESTMENT IN PRIVATE TRUCKING INVOLVES A SYSTEMATIC DEVELOPMENT OF THE COSTS OF ACQUISITION. QUANTITATIVE METHODS ARE DESCRIBED WHICH REVEAL THE BENEFITS OF INVESTMENT AND PROMOTE ACQUISITION OF NEW, PROFITABLE EQUIPMENT. DEPENING ON THE COMPANY'S CIRCUMSTANCES, INVESTMENT LEASING MAY PROVE TO BE THE DESIRED METHOD OF FINANCING. HOWEVER, CAREFUL CONSIDERATION OF THE TAX AND LEGAL ASPECTS IS VITAL. INVESTMENT IN TRUCKING IS ECONOMICALLY JUSTIFIED IF THE DISCOUNTED RATE OF RETURN EQUALS OR EXCEEDS THE NET INVESTMENT OUTLAY. BEFORE A DECISION IS MADE, THE INTANGIBLE FACTORS IN CONNECTION WITH A PROPOSAL MUST BE EVALUATED. A MASTER PLAN FOR INVESTMENT DURING ONE OR MORE YEARS, PREPARED BY SENIOR OFFICIALS CONSULTING WITH LINE MANAGERS, AND EXPRESSED AS A SCHEDULE OF CASH FLOWS, SERVES AS A GUIDELINE FOR THE ALLOCATION OF THE FIRM'S FINANCIAL RESOURCES. PERIODIC PROGRESS REPORTS ARE MADE TO THE PLANNING COMMITTEE AS WELL AS TO LINE MANAGEMENT. APPRAISAL OF RESULTS IS THE RESPONSIBILITY OF THE TRANSPORTATION MANAGER. FINANCIAL INVESTMENT QUESTIONS WHICH MUST BE CONSIDERED ARE: RETURN ON INVESTMENT IN TERMS OF ESTIMATED EARNINGS; ALTERNATIVE USES FOR CAPITAL; LEASING VERSUS OWNING AND ITS EFFECT ON CASH FLOWS; TAX BENEFITS ON NEW EQUIPMENT; AND EFFECT ON INSTALLATIONS. THE PAYBACK METHOD, WHICH MEASURES THE TIME REQUIRED IS DESCRIBED. ALSO DESCRIBED IS A METHOD OF ANALYZING EXPRESSED AS A PERCENTAGE OF THE GROSS INVESTMENT. THE DISCOUNT CASH FLOW METHOD TO DETERMINE A TRUE RATE OF RETURN ON INVESTED CAPITAL (IN WHICH THE ROLE OF TIME IN RELATION TO CASH FLOW IS TAKEN INTO CONSIDERATION) IS REVIEWED AND ILLUSTRATED. LEASING AS AN ALTERNATIVE TO BUYING IS DISCUSSED.