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Different Risk-profile - Shareholders and Management
Shareholders will generally prefer high-risk-high return investments while they are diversified that is they have many investments and the collapse of one firm may have irrelevant effects upon their overall wealth.
Managers on the other hand, will prefer low risk-low return investment because they have a personal fear of losing their jobs whether the projects collapse. Like human capital is not diversifiable. This dissimilarity in risk profile is a cause of conflict of interest while shareholders will forego some profits whenever low-return projects are undertaken.
Existence of Quantity Discounts Recurrently, the firm is capable to take benefits of quantity discounts. Since these discounts affect the price per unit, they influence also
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1-Suppose you deposit $ 5 000 in the bank. How much can you raise after 10 years when discount rate is 5% for the first four years and then rises to 7% annually? 2 -A used car co
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At t = 0, a 3-year, 7% coupon corporate bond with face value $1,000 is trading at a credit spread of 15%. The risk free rate is constant and equal to 4% for all maturities. The rec
Creditors Payment Period Ratio Creditors payment period = 365/ Creditors turnover = (365 x Average creditors)/Annual credit pu
Debtors or Accounts Receiver Turnover Formula is as follow: Debtors/accounts receiver turnover = Annual credit sales/Average debtor The ratio signify the number of ti
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Maghrabi Enclosure follows a moderate current asset investment policy, but it is considering whether to shift to a different strategy. The firm''s annual sales are $500,000; its f
Type of Partnerships There are two main kinds of partnerships. Namely: Ordinary Partnership - An ordinary partnership is one in which all members have unlimited liability.
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