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Why do firms enter an industry when they know that in the long run economic profit will be zero?
Firms enter an industry while they suppose to earn economic profit. These short-run profits are sufficient to encourage entry. Zero economic profits in the long run involve normal returns to the factors of production, as well as the labor and capital of the owners of firms. For instance, the owner of a small business might experience positive accounting profits before the foregone wages from running the business are subtracted from these profits. If the revenue minus another costs is just equivalent to what could be earned elsewhere after that the owner is indifferent to staying in business or exiting.
Selecting the source of the finance: after prepare of the capital structure an appropriate source of the funds. Various sources of the finance may be raised include share capital
Big Joe's is changing a piece of equipment. The equipment will cost $5,000 and has a 5 year life. The equipment can be leased for annual payment of $1,295 paid at the starting of
Q. Can you explain Dispersion method? Dispersion method help to assert risk in receiving a return on investment. The greater the potential dispersion, the greater the risk. One
Rationale for Mergers Many of the motives behind mergers of firms are discussed hereunder: Growth Growth is the most general and important motive for mergers. Merging f
The ability of a firm to satisfy its debt obligations can be assessed using three sets of ratios: Short-term solvency ratios Capitalization
Q. Benefits of Interest rate swaps? Interest rate swaps may provide several benefits to companies including: - The ability to get finance at a cheaper cost than would be p
Exam technique for analysing performance The below steps must be adopted when answering a question on analysing performance: Step 1 Review figures as they are and commen
evaluate the importance of leverage in a small scale companyestion..
Types of FRNs In an era of innovations, while changing needs and preferences of the investors trigger introduction of newer FRNs, the borrowers' funding specifications also nec
Factors Affecting cost of capital are elements in the business environment that cause a company cost of capital to be high and low. Figure below illustrative the various primary fa
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