Managing Financial Principles and Techniques - Coursework Example

Management of the institution is also recommended to reduce the amount of cash and cash equivalent assets outstanding to avoid investing in projects with negative net present value and avoid pushing management into empire building. In all, Autonomy Plc has a good performance in its liquidity, profitability, efficiency, and Long term financial stability as on average it outperformed the industry performance. These interpret a favorable signal to the company's horizontal trend. To suppliers, the quick payment system operated by the company is unique to the industry as such; suppliers should strive at strengthening their relationship. For applicants, the company is a going concern; applicant should not hesitate to seek a career with the company
At the end of the study, investors are called upon to buy or hold the shares of this company.


1.0 Introduction
Globalization, the new information technology, and the deregulation of financial markets have eased the provision and search of finance. Millions of shares are traded every day on the world’s stock markets. (Penman, 2003). Investors who trade on these stocks are often forced to ask themselves whether they are buying or selling at the right price. (Artril & Elliot , 2003). Artrill & Elliot (2003) argue that they often attempt to provide answers to these questions by turning to various media including internet chat rooms, printed press, “talking heads” on television and financial networks, who often voice opinions on what they feel the stock prices should be. In addition, investors consult investment analysts who provide an almost endless stream of information and recommendations to sort out. There are often claims that some shares are undervalued and vice versa. (Penman, 2003).

This information at times becomes confusing leaving the investor with no clear indication of what the true prices of stocks should be. (Penman, 2003). In the prevailing circumstances, Brealey & Myers (2005) state that the investor is forced to make the investment decision following his/her instinct or based on the information provided by the market. (Penman, 2003). Investors who make the decision based on instinct are referred to as intuitive investors while those who make investment decisions based on capital market efficiency are referred to as passive investors. (Penman, 2003). Passive investors carry out their investment decisions based on the assumption that the market price is a fair price for the risk taken, that is, that market forces have driven the price to the appropriate point. (Brealey & Myers 2005).
These investment mechanisms appear to be very simple, as they do not require much effort. (Penman, 2003: pp 3). However, Berlin & Lexa (2003) caution that, both investors run risks that are even more than the risks of the firms they are investing in since they can either pay too much or sell for less and as a result suffer a decrease in returns on their investments. (Penman, 2003).