A carefully build capital structure will contributes to a good market value. If a firm carries too much debt which increases the leverage will influence investors to retract their money. This will make the market value of a firm to decrease. Each of the funds in capital structure has its own cost to the firm. It is because debt and equity are provided by investors or also known as owners and creditors thus, the fund provider has their expectation and demands on the firm’s profitability and growth for long term.
This theory explains that the information about the cash dividend paid by the investor is considered as a signal of the company's prospects for the future. The assumption was attributed to asymmetric information between managers and investors, so
The pursuance of a new strategy inevitably exposes an organisation to some risk, and an evaluation of the risk factors will help to determine the acceptability of a particular strategy. Lynch suggests that the analysis of business risk has two principal components, each of which has a variety of associated techniques. These are financial risk analysis and sensitivity analysis. Financial risk analysis looks specifically at the financial risks of strategic options that have emerged from the strategy choice process. The type of analysis is relatively familiar, according to Lynch (2003) types of financial risk analysis include: Cash flow analysis, Break-even analysis, company borrowing requirements, financial ratio analysis, and currency analysis.
Earned Value Management (EVM) This is depicted by the Pmbok® as a key procedure used to focus the current status of a task regarding time and cash. It is characterized as takes after: 'Earned Value Management (EVM) is a philosophy that joins scope, schedule, and resource estimations to evaluate project execution and advancement. It is an ordinarily utilized system for execution estimation for projects. It coordinates the extension pattern with the expense benchmark, alongside the schedule gauge, to structure the execution standard, which helps the undertaking administration group evaluate and measure project execution and advancement. It is a project administration system that requires the arrangement of a coordinated standard against which execution can be measured for the term of the undertaking.'
Investment Instruments the scheme is investing in: Within an asset class, there are numerous investment opportunities. For example in an equity oriented scheme, if the scheme aims to have a high exposure towards riskier instruments such as derivatives, it could impact the final returns generated by the mutual fund scheme. However, if a mutual fund scheme takes exposure to derivative instruments purely for hedging their positions then it may not turn out to be of very high risk to investors. Benchmark of the scheme- It is important to know how a particular mutual fund scheme benchmarks its performance. A benchmark is selected so that the suitable constituents of the same are structured in the portfolio of the respective mutual fund scheme as
Portfolio managers play various roles in mutual fund industry. • Portfolio managers need to decide the best investment plan for individual by taking into account the age, wages and the ability to undertake risk. One should prepare by keeping aside some amount of money to overcome the unpredictable contingencies for tough times. • Next, a portfolio manager needs to make his client be conscious of benefits of numerous investment tools available in market. The portfolio manager needs to explain the reasons of invest with his client and also choose the most suitable investment plan for the individual.
Financial Management: The financial manager of a firm, mutual fund, insurance company, bank, etc. uses the LP technique for the selection of investment portfolio of shares, bonds, etc. so as to maximise return on investment. 6. Blending Problem: LP technique is also applicable to blending problem when a final product is produced by mixing a variety of raw materials.
Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure Summary This papers investigates the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears costs and why, and investigate the Pareto optimality of their existence. It also provides a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem. The analysis
Option in finance has a meaning of a contract giving the buyer a right to buy the underlying asset or to sell it at a specified strike price (can be set by looking at market price) and date; also depending on which option they bought. Option also has some factors, which are underlying price, strike price, expected volatility, time until expiration, interest rate and dividends.
The most essential factor is the cost of creation. In choosing to market an item, a firm may attempt to choose what costs are sensible, considering current request and rivalry in the market. The item at last goes to the general population and their ability to pay will settle the cost, generally item would be fluttered in the market. (/pricing-decisions-internal-and-external-factors-with-diagram,