Show internal business risk, Financial Management

Assignment Help:

Internal business risk associated with the operational efficiency of the firm. The operational efficiency differs from company to company. The efficiency of operation is reflected on the company's achievement of its pre-set goals and the fulfillment of the promises to its investors.

(i) Fluctuations in the Sales: The sales level has to be maintained. It is common in Business to lose customers abruptly because of competition. Loss of customers will lead to a loss in operational income.

(ii) Research and Development (R&D): Sometimes the product may go out of style or become obsolescent. It is the management, who has to overcome the problem of obsolescence by concentrating on the in-house research and development program. Short sighted cutting of R & D budget would reduce the operational efficiency of any firm.

(iii) Personnel Management: The personnel management of the company also contributes to the operational efficiency of the firm. Frequent strikes and lock outs results in loss of production and high fixed capital cost. The labor productivity also would suffer. The risk of labor management is present in all the firms.

(iv) Fixed Cost: The cost components also generate internal risk if the fixed cost is higher in the cost component. During the period of recession or low demand for product, the company cannot reduce the fixed cost. The same time in the boom period also the fixed factor cannot vary immediately. Thus, the high fixed cost component in a film would become a burden to the firm.

(v) Single Product: The internal business risk is higher in the case of firm producing a single product. The fall in the demand for a single product would be fatal for the firm. Further, some products are more vulnerable to the business cycle while some products resist and grow against the tide. Hence, the company has to diversify the products if it has to face the competition and the business cycle successfully.


Related Discussions:- Show internal business risk

Assignment, what are the features of branch accounting

what are the features of branch accounting

Managing risk and contingency plan, Managing Risk and Contingency Plan: ...

Managing Risk and Contingency Plan: An essential component of any financial management framework is the validation and protection of the information contained in the system. In

Leverage, What are the importance of leverage on a small scale firm?

What are the importance of leverage on a small scale firm?

gaaps that are mandatory, a) Talk about in brief the various GAAPs that ar...

a) Talk about in brief the various GAAPs that are mandatory to be followed. b) What are the several components of total cost.

Compare financing arrangements and substantiate, North Star Company, a U.S....

North Star Company, a U.S. based MNC, is considering to establish a subsidiary to capitalize on the removal of Eastern European border restrictions. The subsidiary would manufactur

Miller approach of irrelevance of dividends, Q. Miller Approach of irreleva...

Q. Miller Approach of irrelevance of dividends? Discuss the Modigliani as well as Miller Approach of irrelevance of dividends. What are its drawbacks? Ans. Modigliani with M

Prepare an investment plan proposal, Yanni and Joanna need some investment ...

Yanni and Joanna need some investment advice. Joanna has sold $660,000 worth of Woolworths Limited (WOW) shares that she inherited late last financial year. She has $616,000 remain

Review of financial research report, This assignment is an analysis of a U....

This assignment is an analysis of a U.S. publicly-traded company; its common stock could be a prospective investment. The report is due in Week 10, in needs to be at least 5 pages

Case let, This case has been framed in order to test the skills in evaluati...

This case has been framed in order to test the skills in evaluating a credit request and reaching a correct decision. Perluence International is large manufacturer

No external financing for new proposals, No External Financing for New Prop...

No External Financing for New Proposals: If a firm have sufficient retained earnings with it as required by the new proposal, then the firm may not raise any external finance. In

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd