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

Optimal cash model, Optimal Cash Model: Cash Management is a bigger as...

Optimal Cash Model: Cash Management is a bigger aspect that involves range of functions that assist individuals and business to process their payments and receipts in an organ

Current assets, A firm has $700 in inventory, $600 in fixed assets, $600 in...

A firm has $700 in inventory, $600 in fixed assets, $600 in accounts receivables, $800 in accounts payable, and $50 in cash. What is the amount of the present assets?

Stakeholder vs shareholder approach, QUESTION 1 (a) What do you underst...

QUESTION 1 (a) What do you understand by the term Civil Society Organisations? (b) Distinguish between sectional and promotional groups. Give examples to support your answer

What is substantive test, what is Substantive tests or transactions based a...

what is Substantive tests or transactions based auditing Tests to attain audit evidence to detect material misstatements in financial statements. Using analytical procedures an

Determine the objectives of the firm, Determine the Objectives of the Firm ...

Determine the Objectives of the Firm Objectives of the Firm - Profit Maximisation and Wealth Maximisation To put it simply, we may say that goal of any business is to max

Borrowing funds via repurchase agreements, Repurchase agreement is a ...

Repurchase agreement is a contract wherein the seller of a security agrees to buy back the same security from the purchaser at a specified price and time. It is also

Determine wacc- net operating cash flow- npv- irr-pi, Prepare a capital bud...

Prepare a capital budget analysis of the following data, your analysis should determine WACC, Net Operating Cash Flow, NPV, IRR, PI, and Payback analysis. This analysis is for t

State about the capital structure of financial risk, State about the capita...

State about the capital structure of financial risk Frequently the funds supplied to a firm by lenders will change its financial structure and charge for the funds would be bas

Please help me solve this question, there are 3 compaies i have to find out...

there are 3 compaies i have to find out the price of equity share by using walters and gordons model.

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