Nobody downloaded yet

Financial management - Assignment Example

Comments (0) Cite this document
Summary
A perfect market further pertains to a free or boundary less market for new entrants to become a part of it and existing ones to move away…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92% of users find it useful
Financial management
Read TextPreview

Extract of sample
"Financial management"

Download file to see previous pages In a perfect market, it is assumed that no taxes are imposed and interest rates are derived by the market demand and supply function (Layton, Robinson & Tucker 2012, p. 895).
If we consider a perfect competition in the market, an investor would be indifferent of the capital structures followed by each firm. The M&M theory suggests that in a tax-free economy, capital structure becomes irrelevant to the value of the firm. Some assumptions that the theory makes include:
Investors are concerned about the returns or future cash inflows. Hence, they expect the same whether the investment is made in bonds or equity. As a result, investors would make decisions based on the firm’s value.
Debt and equity components are traded in perfect markets, such that the transaction costs, taxes and bankruptcy costs are nil. Competitors, in a perfect competition market cannot set their own price for similar product offerings. Moreover, investors do not bear the burden of transaction costs leading to their indifference to moving funds from one company to the other.
Keeping an eye on the above discussion, it can be concluded that investors would go for an geared company if they are interested in the investment returns. In the case provided, Aguia seems to be a more lucrative opportunity for the investors. Aguia, being a geared company will have lower cost of capital and have higher expected returns in future. Since, it was assumed and provided above that investors are only concerned about the future cash flows, a rational investor would prefer a geared firm i.e. Aguia over the un-geared firm i.e. Pomba, in our case. In addition, a rational investor can make decision on future prospects and plans of the management. Let’s assume that Pomba plans to switch toward debt financing, it might be a more attractive option compared to Aguia as it has higher profit margins comparatively. Hence, financing arrangements in a ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Financial management Assignment Example | Topics and Well Written Essays - 3000 words”, n.d.)
Financial management Assignment Example | Topics and Well Written Essays - 3000 words. Retrieved from https://studentshare.org/finance-accounting/1683396-financial-management
(Financial Management Assignment Example | Topics and Well Written Essays - 3000 Words)
Financial Management Assignment Example | Topics and Well Written Essays - 3000 Words. https://studentshare.org/finance-accounting/1683396-financial-management.
“Financial Management Assignment Example | Topics and Well Written Essays - 3000 Words”, n.d. https://studentshare.org/finance-accounting/1683396-financial-management.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Financial management
...?Executive Summary Financial management is at the core of implementing organizational objectives and goals since finances are the engine of organizational survival. Financial management practices differ in different organizations but common financial management practices are must be adhered. Non-governmental Organizations are set up to offer services or goods to people with the aim of assisting them though capacity building. Financial management practices in NGO’s are different from the operations of For-Profit organizations. For instance, NGO’s source their funds through donations, sponsors or charitable sources. This is different from For-Profit organizations that source their funds from shareholders who are the real owners... of these...
6 Pages(1500 words)Essay
Financial Management
...?Financial Management Introduction: Manchester fire and rescue service is the largest fire and rescue service station that is situated outside London. It comprises of nearly 2500 members of staff as well as 41 fire stations. The service covers around 500 square miles thereby providing benefit to nearly 2.5 million people. Greater Manchester consists of ten different districts they are Bolton, Bury, Manchester, Oldham, Rochdale, Salford, Stockport, Tameside, Trafford, and Wigan (About Us. 2011). Every organization whether it is a profit or non profit one will be having a financial structure. Financial structure refers to the right side of the firms or organizations balance...
10 Pages(2500 words)Assignment
Financial Management
...?Financial Management Part Identify and explain the objectives and general principles of Panel of Takeovers and Merger The panel of Takeovers is an independent body which was developed in 1968 its objective is the fair treatment of shareholders and an opportunity is put in front of them to determine the general benefits of a takeover and that an offeror provides same if not better treatment to shareholders of the same class (Hicks & Goo 2008, p. 569). It essentially provides a structured framework through which takeovers are carried out and to uphold the reliability of the financial markets in combination with regulatory regimes of other places. Matters of financial or...
7 Pages(1750 words)Essay
Financial Management
...? Amazon and Apple Amazon and Apple Financial crisis presents a number of challenges to businesses. These challenges are different depending on the products or services a company provides or on the size of the business. The challenges may include reduced profits and reduced sales. However, a business has to respond to these challenges if it has to remain in business by creating measures that address, for instance reduced profits or that increase sales. Apple and Amazon are examples of Multinational Businesses that faced the financial crisis of 2008; diversified measures implemented them and recovered from the reducing profits they were earning (Foster, 2009). Apple Inc, on one hand, is a multi national corporation in California... that...
5 Pages(1250 words)Research Paper
Financial Management
...with this project, which amounts to 3,000,000. All in all, the total initial outlay by Johnson industries is 12,000,000. Question 12-2 Nixon Communications is trying to estimate the first-year operating cash flow (at t = 1) for a proposed project. The financial staff has collected the following information: Projected sales $10 million Operating costs (not including depreciation) $7 million Depreciation $2 million Interest expense $2 million The company faces a 40% tax rate. What is the project’s operating cash flow for the first year (t = 1)? question 12-2             projected sales 10000000 less: operating costs -7000000 less:...
8 Pages(2000 words)Essay
Financial Management
...Financial Management Introduction: Finance is the integral part of any organisation. Financial management plans for the future cash outflow. The keyobjective of finance management is to create wealth to the business organisation, generate cash flow and to provide an adequate investment for the free flow of the business activities. The main objective of the financial management is to provide funds for the business. This is the backbone of the business because no firm or company can run without funds. There are many options for availing funds from different quarters. Although the discretion lies with the...
12 Pages(3000 words)Essay
Financial Management
...Financial Management Submitted by: XXXXX XXXXXX Number: XXXXXXXX of XXXXXXXX XXXXXXX XXXXXXXX XXXXXX Date of Submission: XX – XX – 2009 Number of words: 1651 (Excluding Bibliography) Part A: The importance of capital structure and the cost of capital in the efficient financial management of large companies Financial Management: “Financial management entails planning for the future of a person or a business enterprise to ensure a positive cash flow. It includes the administration and maintenance of financial assets. Besides, financial management covers the...
6 Pages(1500 words)Essay
Financial Management
...other. A company with high levels of profit margins generally tend to have a low level of working capital. Similarly a company with low level of working capital will have much higher levels of liquidity (Bhattacharya, 2001). The working capital management mainly deals with the amount of liquidity of the firm and the profitability. The main aim is to ensure that both are in place while dealing with the day to day processes and operations. The short term and long terms financial planning play a major role in the overall liquidity of the company. The long term financial planning and the basic availability of the resources are both managed by the overall solvency of the...
8 Pages(2000 words)Essay
Financial management
...and optimal performance, a W/C ratio between 1.2 and 2.0 is sufficient. A debt ratio that is greater than 1 would indicate that Mr. Banks company owns more debts in comparison to assets. Similarly, if his company is capable of having a ratio that is less than 1, this indicates that PQ has more assets compared to debt. When the debt ratio is used in conjunction with other measures of financial health, Mr. Banks would find it easier to determine the risk level his company is to face in the near future. Gross profit margin: If PQ earned $20 million in revenue solely from producing widgets and was successful in incurring $10 million in COGS- related expense, the gross profit margin of Mr. Banks Company would be 50%. This...
6 Pages(1500 words)Case Study
Financial Management
...Financial Management no. Amalgamated Becoming a winner at anything worthwhile requires a game plan. This idea applies to organizations, departments, teams and even to individuals. Being successful entails making good use of the available resources to the best advantage. For the profit making company, such as the Amalgamated Industries Limited (AIL), competition and profitability are much important aspects. The Amalgamated Industries Limited (AIL), require a strategy which would help them to increase their profitability, gain more market share and increase their approval ratings. In order to determine the best strategy for the company, there is the need to understand fully the external and internal environmental factors that affect... . The...
9 Pages(2250 words)Case Study
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.
Let us find you another Assignment on topic Financial management for FREE!
Contact Us