StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Positive Relationship between Financial Decisions and Values of Firms - Essay Example

Cite this document
Summary
The paper "Positive Relationship between Financial Decisions and Values of Firms" highlights that the relevance of financial decisions can be best attested based on the way investments are financed, revenue is distributed and amounts directed towards certain projects…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98.2% of users find it useful
Positive Relationship between Financial Decisions and Values of Firms
Read Text Preview

Extract of sample "Positive Relationship between Financial Decisions and Values of Firms"

? Finance and Accounting Introduction Basing on the principle of the central limit theorem, a sampling distribution of statistics becomes normal or near to being normal whenever the sampling size is large enough. When applying this principle for a sampling distribution of the mean, it is possible to find the sample distribution of the means by supposing that if one draws all possible samples of say size n from a given population of say size N, and supposes the mean score for the samples is computed separately, then the sample distribution of the means can be obtained. In this case, the population mean (?) is often equal to the sampling distribution mean, and the standard error of such sampling distribution (?x) can be determined using the population standard deviation (?), the sample size and the population size. Using mathematical equation, the equations below serve to indicate the mathematical relation between the population mean and the sampling distribution, and the relation between the sample distribution, the population standard deviation, the populationa dn the sample size as shown ?x = ? and ?x = ? * sqrt(1/n - 1/N ) Basing on the mathematical expressions above, it is possible to specify the sampling distribution of the mean unless two conditions are met. First, when the population is said to be normally distributed or otherwise if the sample size is said to be sufficiently large. Secondly, the standard population of the population is known. In this problem, the two conditions are met and, therefore, given the standard deviations, and the means of the five samples given, the mean of the population can be calculated through averaging the sample means. This can be accomplished mathematically, as the population mean = (80934 + 78110.48 + 80,340 + 84716.5)/5 = 64,890.196 $. In a sampling distribution of means, the populations mean (?) has been found to always equal to the sampling distribution (?x) mean. Clearly, the sample distribution is equal to 64,890.196 $. In order to find the standard error of a sampling distribution, the important parameters are the population’s standard deviation, the size of the sample, as well as the population size. In this case, the standard deviation of the population is found by averaging the standard deviation as (809.34 + 3888.243 + 3334.5 + 3351.6 + 3332.45)/5 = 2943.22$. From the initial knowledge the standard error of the distribution becomes ?x = ? = 64,890.196$. It is also possible to use the relation ?x = ? * sqrt( 1/n - 1/N to find the standard error of the sampling distribution becomes, which is given by 2943.22 x 0.00137 = 4.03733. Given that the sampling distribution of the mean has been shown to be normally distributed, with a mean of 64,890.196, and the standard error of 4. 03733, in order find the probability that this revenue shall exceed $ 2,2200,000, we shall make use of an online normal distribution calculator. Fitting the these values into a distribution calculator, probability is found to be 0.05. For case II The probability that the revenue shall exceed $, 2,500,000, is found by fitting the values of the standard deviation, the mean and the value $ 2,500,000 into an online normal distribution calculator, which shows that P ( Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Research method Essay Example | Topics and Well Written Essays - 2000 words”, n.d.)
Research method Essay Example | Topics and Well Written Essays - 2000 words. Retrieved from https://studentshare.org/finance-accounting/1464064-research-method
(Research Method Essay Example | Topics and Well Written Essays - 2000 Words)
Research Method Essay Example | Topics and Well Written Essays - 2000 Words. https://studentshare.org/finance-accounting/1464064-research-method.
“Research Method Essay Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/finance-accounting/1464064-research-method.
  • Cited: 0 times

CHECK THESE SAMPLES OF Positive Relationship between Financial Decisions and Values of Firms

Financial Policies and the Value of the Firm

Stiglitz (1974) highlights the fact that there is a relationship between both types of decisions which may not be obvious.... It is important that firms are financially flexible in response to variables n the environment.... Perfect certainty on the other hand indicates that investors have no doubt in relation to the investment and financial policy of the firm as well as the future levels of profitability of all firms.... The reason for this extension is to give consideration to a wider range of financial policies to include not only a debt to equity ratio but a dividend retention ratio, a debt maturity structure and possibly the holding of securities in other firms....
14 Pages (3500 words) Literature review

Financial Conservatism. Determinants of cash and leverage

What's more, most of the studies that have dealt with this area have been concentrated on the US firms, hence making it important to investigate whether the puzzle regarding decisions of firms in relation to financial conservatism extends to the UK firms.... This study will use leverage of firms or cash holdings to determine whether the firms are finically-conservative.... Mikkelson and Partch provide that financially conservative firms are those that continually hold huge cash balances to finance their financial activities, meaning that they hardly rely on borrowed capital to finance their investment opportunities....
18 Pages (4500 words) Dissertation

Positive Accounting Theory

Positive Accounting Theory (PAT) involves predictions of choices of firms as pertains accounting policies and the response of firms to any new accounting policies.... As the author puts it, there has been a debate on how suitable the theory is in the prediction of how firms choose the accounting policies they use.... In arriving at the choices to pursue, firms are guided by factors within the industry in which they operate.... However, managers still need some freedom to make decisions dependent on the situation....
6 Pages (1500 words) Essay

Capital Structure of Non-financial Companies in Egypt

The author also outlines the development of foreign investments and multinational firms, companies' profitability in Egypt, the firms' behaviors changed in different ways according to the characteristics of their different environments.... For instance, Bevan and Danbolt (2002) while generally focusing on long-term debt structures, analyzed firms that implemented high percentages of short-term debt structures, and argued that these structures demonstrate minimal explanatory results....
42 Pages (10500 words) Dissertation

The Capital Structure of the Organisation: Maximize Firm Value and Minimize Average Cost of Funding

Mostly, the secondary sources of data have been used to determine the relationship between the capital structure of the firm and its value.... This paper examines various capital structure theories like a pecking order, trade-off theory etc and its impact on capital structure decisions.... The financial managers of a company work towards achieving an optimal capital mix.... In large companies, there is a separate financial department that takes care of financing issues....
20 Pages (5000 words) Research Paper

Financial Modelling - Relationship between Market Risk and Stock Return

Invest well (a large investment management firm) has been identifying how historical factors can be used to explain the future performance of firms on the stock exchange.... The paper 'Financial Modelling - relationship between Market Risk and Stock Return' is a thoughtful example of a finance & accounting report.... The paper 'Financial Modelling - relationship between Market Risk and Stock Return' is a thoughtful example of a finance & accounting report....
16 Pages (4000 words)

Dividend Policy and Shareholder Wealth

he relationship between a firm's dividend policy and shareholders' wealth was first studied by Modigliani and Miller (1961).... financial management theorists have varying opinions on the effect of a company's dividend policy on the shareholders' value.... financial management theorists have varying opinions on the effect of a company's dividend policy on the shareholders' value.... financial management theorists have varying opinions on the effect of a company's dividend policy on the shareholders' value....
6 Pages (1500 words) Literature review

Effect of Capital Structure of China Listed Companies on Financing Decisions

Their long-term debt level is lower compared to western firms; and both institutional ownership and state ownership lack any considerable impact on the capital structure in Chinese companies.... ffect of Capital Structure of China Listed Companies on Financing DecisionsChapter 1: IntroductionBackgroundListed firms and stock markets were not in existence in China till the late 80s when the country's regime opted to restructure the industrial sector that was dominated by state-owned enterprises (SOEs)....
47 Pages (11750 words) Dissertation
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us