Investment Advisors Case Study

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.

A securitization transaction is widely used by the organizations in order to prevent any potential risk happen in their organizations. According to Senanayake (2010) on her books is Asset-backed securitization and the financial crisis stated that, securitization is the process of individual loan packaging and other debt instruments. Where the packaging process will be transfer as a security to improve a rating or credit status. While Davidson et al. (2003) stated that securitization is a process of packaging and transfer financial promises into form where it can be easily transfer to other investors.

Investing in a property blindly Many investors make the mistake of buying properties based on bad advice. They have little education to make the decision on their own. As a result, they fail to make right investment decisions and invest in wrong properties that don’t prove much profitable in the future. So, if you want to become a successful investor, you should spend enough time on educating yourself so that you can make the decision confidently. Thus, you will be able to gain high profit with comparatively less

The key is not to replicate his value-investing strategy, but is to be different. The key reason why Buffet is successful is because he is different – when he first practiced value investing, the other investors around were chasing after the highest yielding stocks. Similarly, if one wants to be successful today, he or she has to be different from the rest of the investors. However, being different is difficult. It comes with much risk, similar to choosing between the career paths of high-risk entrepreneurship and well-trodden investment banking jobs.

Volatile assets can report changes in income that aren’t actually accurate to the longterm financial picture, creating misleading gains or losses in the short-term picture.  Misery typically loves company If one business is seeing a reduction in net income thanks to asset losses, then this trend typically creates a domino effect throughout a region or an industry. Downward valuations are 8 contagious and often trigger selling that is unnecessary because of the volatility of the market. When this method of accounting isn’t used and downward valuations don’t have to happen, there is more investor stability that can, in turn, keep a region or industry’s overall economics stable as well.  It reduces investor satisfaction Some investors don’t always notice that a company is using the fair value approach

What Watts is essentially trying to say is that, if a firm overstates net assets they will increase litigation costs than if they understate their net assets. So conservatism decrease litigation cost to the firm and limits management’s opportunistic behaviour. If a firm is reporting continuous profits and then goes bankrupt a shareholder is likely to sue but if a firm is reporting losses and then goes bankrupt shareholders will sell their shares eventually. Basically, firms are more likely to be used if they are being less conservative and less likely to be used if they are being more conservative. Watts’ accounting regulation explanations and evidence have important implications for accounting regulators (Watts 2003).

Having High Net worth Individuals (HNI’s) and corporate organizations invest in treasury securities backed instruments could dictate impending survival of discount houses.  There is need for proactive management of discount houses because the recent experience in the country’s financial sector calls for competent discount houses to ensure that banks continue to transact business with them in form of call deposits. Discount houses must be run professionally in order to guarantee optimal contribution to the improvement of the financial

The moral hazard of too big to fail institutions also applies to creditors. If a creditor feels that a firm is too big to fail, they will demand less compensation for their risk. The financial markets in general can become less disciplined, further causing destabilization. This, combined with the moral risk within these large firms, can create a spiral effect of irresponsible financial decisions. Executive

In addition, the risks of investing the business must be stated. This helps the investor know how safe his or her money is once they invest in the business. Lastly, a business case must include value analysis. Value analysis is a summary of the benefits of each step of investment. The value analysis is critical as it is the one which enables to decide whether to invest in the business or not.

Moreover, two methods that you can use to perform an investment analysis include: Top-down approach You can start by analyzing the broad perspective and end with the analysis of the specific stock or bond you want to invest in. With this method, you can determine the profitability of investments, direction, and significance of any interest made. You can also use this method to determine the conditions affecting a market and how they impact the market. However, a major disadvantage of using this method is that it causes investors to overlook some stocks that have the potential of offering large returns. To avoid this, you can use the bottom-up method.