On-Line Technology Is Changing Capital Budgeting & Investment

On-Line Technology Is Changing Capital Budgeting & Investment

Advances in on-line technology are changing the world of finance from the perspective of financial managers and investment professional. Financial records are now a strategic tool, as they are massaged using different tools so as to extract more information. The Internet has created virtual capital markets where both new equity and debt are raised; as well as a medium for virtual global trading.

Johnson & Johnson (J&J) is using a ‘data warehouse’ called Darwin to enable their managers in some 50 counties to "slice, and analyze masses of information from computers all over the country on everything from accounts receivable to inventory." In the process, the role of the Chief Financial Officer (CFO) is being redefined:

Old Role	New Role
Bean-counter; minor player in formulating corporate strategy	Major player; involved in line activities and long-range planning
Focused on narrow treasury and accounting matters	Uses financial technologies for more challenging analytical tasks
Preoccupied with cost efficiencies	Integrally involved in boosting revenue

Wal-Mart Stores Inc. uses a proprietary Internet-based system to coordinate forecasts of consumer demand between itself and suppliers. The system allows the company to use its data on past sales, trends, promotion plans and whether to develop a forecast. The forecast is then relayed to suppliers so they can save on excess inventory and operating costs.

On the investment side, the Internet is being used to raise new debt and equity. Brokerage firms are using it to sell stocks, bonds, and mutual funds, as well as provide research information and create virtual stock exchanges.

Source: Business Week, October 28, 1996, pp. 130-150.

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