Analyses may be criticised for conveying a false sense of accuracy by including quantified values for non-monetary effects such as the value of forecast savings in human lives. Such values are often controversial and may diminish the authority of the analysis as a whole. On the other hand, analyses may be criticised for excluding intangible effects. Downs and Larkey (1988) state
This mean that even though the normative analysis assume that the bond-warrant is more advantageous as compared to convertible bond but this theory is unable to be practice in the real world if the bond-warrant is not demanded by investor. Which mean, even though the firm has a good product but if there is no one to buy it, then what is the point of selling it. For a firm to get a financing, it has to follow the preference of the investor. If not, then the firm unable to pool high amount of money to expand its business. 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.
However, since conditions for a perfect market do not exist in a real capital market, security prices may not fully reflect all relevant information. Fama therefore pointed out the need to define the requirement for a stock price to fully reflect information in EMH in terms of expected return from holdings a security. He also pointed to the need to define relevant information in the EMH, and in defining it, he divided the market into three levels: the weak form, the semi strong form and the strong form. The EMH has three sub-hypotheses: the weak form, semi strong and strong form efficient market hypotheses. Each deals with a different level of cumulative information.
However, another assumption is the complete opposite from the first assumption. As beneficial as it could be, economic interdependence could be one dangerous factor in the world function. That will be explained in detailed in this paragraph. The second assumption claimed that economic interdependence could also lead the world to instabilities and insecurities as well. First of all, economic interdependence is not always about peaceful cooperation all the time.
However, the level of success of political democracies curbing socio-economic inequalities varies from state to state, and how they are affected by neo-liberal policies. Empirical studies, though inconclusive, have illustrated the importance of refraining from making generalisations about the democracy-inequality
In the event where there is a fall in the spot price, any financial gains from a hedging program may be seen as speculative returns. Typically there is no perfect hedging in reality as it is difficult to have three features of a futures contract matches with the asset to be hedge. When there is an imperfect hedge, the loss in the spot market may not be covered by the gain in the futures. The importance to realize that hedging using futures contracts can result in a decrease or an increase in profits relative to its position with no hedging. If the price of oil drop, the futures position leads to an offsetting gain.
However, the inventory and cost of goods sold balances can vary dramatically in any given period. The LIFO Reserve To overcome this issue, many companies maintain their internal records using FIFO, weighted average cost but external reporting using LIFO for income tax
Introduction With the development of global economic globalization, many multinational companies have trade and investment in all parts of the world. Sometimes the business in a multinational company involves a variety of currencies.Multinational companies with a lot of foreign currency transactions often face the risk of exchange rate fluctuations. In order to manage exchange rate risk, hedging has become a strategy for many companies even the use of hedging will produce a certain cost. The report will discuss why foreign exchange rate risks need to be managed. It will also refer to the problems that may be faced by multinational corporations in various fields and the role and implementation of hedging.