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

Display profit diagrams for long stock and for short stock, Question: (...

Question: (a) A stock currently sells for $80 and a put option with an exercise price of $80 currently sells for $2. Find the percentage gain to an investor in the common stock

Current yields for treasury bond, ACT presently is all-equity financed. Thi...

ACT presently is all-equity financed. This reflects the stance of the former CEO, a dominant personality who stated repeatedly: "I don't want us to be in thrall to the demands of t

Coefficient of variation evaluating risk of capital budget, Why is the coef...

Why is the coefficient of variation a better risk calculates to use than the standard deviation while evaluating the risk of capital budgeting projects? The coefficient of variat

Qualification criteria for a bidder of contract, Q ualification criteria ...

Q ualification criteria We discussed how to prepare the bid documents. Let us now see what criteria should be considered to qualify a bidder. You will have to open bidding

What is creative accounting, What is Creative accounting Creative accou...

What is Creative accounting Creative accounting (also termed as aggressive accounting or earnings management) distorts financial analysis of company accounts. Creative accounti

Income statement & balance sheet, in 2002, jackson incorporated had gross s...

in 2002, jackson incorporated had gross sales of $4269200. for 2002, management estimated that returns and allowances would be 5 percent of gross sales. what did jackson report as

Describe about accountants report, Q. Describe about Accountants Report? ...

Q. Describe about Accountants Report? Accountants' Report - Formal document which communicates an independent accountant's: (1) expression of limited assurance on FINANCIA

Calculate the changes in the margin account, Suppose today's settlement pri...

Suppose today's settlement price on a CME DM futures contract is $0.6080/DM. You comprise a short position in one contract. Your margin account at present has a balance of $1,700.

Price/yield relationship in bonds, Bond Price is the purchase value o...

Bond Price is the purchase value of a bond. It can be priced either at a premium, discount or at par. It is important for the prospective buyer to know how to det

Explain about the international finance, Explain about the International Fi...

Explain about the International Finance When money crosses international boundaries businesses,individualsand governments should deal with special kinds of problems. Every c

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