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

Fundamentals of structured product engineering, Fundamentals of Structured ...

Fundamentals of Structured Product Engineering 1. (a) Let r m denote the m month swap rate (or Libor rate). Subsequently the 3 × n month forward rate f (3 ×n )

Determine the symptoms of overtrading, Determine the Symptoms of overtradin...

Determine the Symptoms of overtrading Symptoms of overtrading are:- Fast sales growth Increasing trade payables Increasing trade receivables Fall in cash ba

Calculate weighted average cost of capital, Ocean Blue Vessels Ltd is a rea...

Ocean Blue Vessels Ltd is a real Liner firm whose capital structure consists of debt, preference shares and equity shares. The company plans to raise further capital for its expans

What is fv of a single present cash flow, Q. What is FV of a Single Present...

Q. What is FV of a Single Present Cash Flow? the future value of a single cash flow is defined in term of equation as follows: FV = PV (1 + r)n Where, FV = Future value PV = Pr

What do you mean by synergy, Q. What do you mean by synergy? Synergy: s...

Q. What do you mean by synergy? Synergy: synergy refers to the greater combined value of merged firms than the sum of the values of individual units. It is something like one p

Analysis on the stocks, Yellow: is the company which their stock performanc...

Yellow: is the company which their stock performance was forecasted by analyst Blue: is the name of the company which made the recommendation by the analyst who work for it R

Risk-free interest rate, Price an Asian call option with on a stock with th...

Price an Asian call option with on a stock with the initial stock price $50 and volatility 30$. The strike price of the option is $52. The time to maturity of the option is 3 month

INTEREST, Mr. X invests Rs. 10000 at 10% p.a compounded semi-annually. Comp...

Mr. X invests Rs. 10000 at 10% p.a compounded semi-annually. Compute value after three years.

Answer to an exercise, dear, I found an exercise on the Internet which coul...

dear, I found an exercise on the Internet which could help me has better to understand the finance, but there were no answers. What is that you can help me has to solve it. I''m fr

Why do financial managers calculate the marginal tax rate, Why do financial...

Why do financial managers calculate the marginal tax rate? Financial managers utilize marginal tax rates to calculate the future after-tax cash flows from investments.  Ever si

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