This might however have a negative impact on return on equity (Aktan et al., 2013). Through disintermediation, banks cease to be financial intermediaries (their lending power eroded) and become financial agents with interest in investment advisory and related services. Since banks tends to have less funds at their disposal to loan out, their profits can no longer be on a cost-plus basis but rather will tend to be determined by market forces. This reduces to some extent some level of certainties and volume in banks turnover. Disintermediation "unbundles" risks on the part of the fund providers.
However, it cannot be denied that normative analysis mention of how much does the bond-warrant gives benefit as compared to the convertible bond and this is true but there is one thing that the author and the normative analysis didn’t mention in this paper, which is about the disadvantages of both bond-warrant and convertible. Given only the advantages of both bond doesn’t actually determine the reason behind why investor choose to invest in such securities. It might be that the bond-warrant poses a high risk as compared to the convertible bond or it might be other disadvantages that influence the decision of the investor and the issuer. This question should be answered by the author in this paper. However, back to the main aim of this paper, in order increase the usage of bond-warrant, more
But, firms generally announce repurchase programs before embarking on them to avoid potential stockholder suits. 2. The firm may pay too much for the repurchased stock, to the disadvantage of remaining stockholders. If the firm seeks to acquire a relatively large amount of its stock, then the price may be bid above its equilibrium level and then fall after the firm ceases its buyback operations. Comments on Stock buyback: 1.
As the capital structure changes, there is a definite effect on the balance sheet of the company. There is financial flexibility by using stock. Payment solely by stock might reduce the profitability ratio of the company and if it is by cash, the company will show higher liquidity ratio. Not all firms have liquid cash to complete the transaction so they deal by involving both cash and stock as the risk will be divided and hence it is the most attractive method of financing the
ARR AND NPV Accounting rate of return (ARR) is the average profit you expected from an investment; (Average annual profit/ total value of investment)= ARR. Net present value (NPV) determines the value of a project whether to accept or to reject it. According to the scenario; it stated Mr.Javins sometimes used ARR method rather than NPV, since he preferred. This cause conflict with finance team because, ARR is uses profits rather than cash flows, profits affected by non cash items. Therefore, ARR over estimate the profit (higher profit) and ARR don’t count time value of money plus it doesn’t adjust to risk too.
It’s a lot less riskier than concentrated portfolios because in a concentrated portfolio, if the stock you invest in fails, all money will be lost, where in a diversified portfolio if one of the sectors you invested in fails, lost will be minimized by the gains of other sectors investments. Other than balance the portfolio, it’s also important to know what stocks to buy. One wrong decision and the company might lose money. It’s not like you could buy a bunch of random stocks and hope it’ll all go
Hence, when it announces the acquisition, firm value may drop simply because investors conclude that the market is no longer growing. The acquisition in this case does not destroy value; it just signals the stagnant state of the market. Why do sellers earn higher return? Buying firms are typically larger than selling firms. In many mergers there are so much larger that even substantial net benefits would not show up clearly in the buyer’s share price.
Adverse selection is an economics term means an undesired result happens which the quantity and the price of goods or services altered because of sellers and buyers have different or imperfect market information. For example, executives may more willingly issue shares when the share price is overvalued compared to the real value, buyers will finally buy the overvalued shares and lose money. If the company charges an average price but only the consumer who can pay more buy, the company takes a financial loss by paying out more benefits. Due to adverse selection may lose some of the customers, and we assume that every company should be profit maximization, moral hazard is more widespread than adverse selection in a company. We will discuss few major issues regarding tackling moral hazard under the CG requirements: Issue 1 – executives should act in the best interests of the company and
The second type of profit, which results at the end of the holding period by selling the propriety is in contrary uncertain because this profit might be affected by current unexpected economic events turning the investment into a capital loss. This extreme event is in the case of real estate investments very seldom. The eventuality of a total capital loss is of some rarity because the owner can still detract a profit by the piece of land the propriety is
The increase in volume is significant, there is usually a reason. Whether there is an insider accumulating a position based on insider knowledge, or a fund adding more of the stock to its portfolio, that action usually begets more buying, which begets more buying. This is the nature of momentum, and why volume plays a crucial role in technical analysis. The Basics of Technical Analysis Support and Resistance One of the earliest things a beginner at technical analysis will hear about is the concept of support and resistance. In their simplest form, support is the lower level in a price channel that price “bounces” off and stops declining in price.