Nevertheless, Florackis et al. (2011) identify the drawbacks of Amihud’s ratio such as a significant size bias meaning that illiquidity ratios cannot be compared across the stocks with various market capitalizations. In addition, the auhtors point to the fact that investors’ holding horizons are neglected by Amihud’s illiquidity ratio. Hence, it might be concluded that the universe of liquidity proxies is vast. The choice of liquidity measures is mainly conditioned
This economic school of thought focuses on the money supply in determining the price level and nominal GDP and therefore determining the overall growth of the economy. The founder of this theory is Milton Fremon who disagreed with Keynesian beliefs. Their basic theory was based on a mixture of theoretical ideas, policies, and philosophical beliefs. Most important part of this economic thought is The Quantity Theory of Money, the equation used for exchange (MV=PY). This theory was unpopular with most Keynesian because of their belief that velocity was unstable and the economy would not return to potential output without help.
The Real Business Cycle Theory. The most important idea of the Real Business Cycle Theory is that business cylces occur due to productivity shocks or changes in the rate of technological process. Business cycles can be characterised by comovements of a large number of economic variables and also periods of expansion associated with high levels or economic activity and periods of contration associated with periods of low economic activity. The RBC deals exclusively the real varibles and not nominal variables. As a result of this RBC theory cannot be used to estimate inflation or to study the relationship between output and inflation.
Indeed, ratio analysis is often criticized on the grounds of subjectivity that is the analyst must pick and choose ratios in order to assess the overall performance of a firm. In this paper we demonstrate that Data Envelopment Analysis (DEA) can augment the traditional analysis. DEA can provide a consistent and reliable measure of managerial or operational efficiency of a firm. We test the null hypothesis that there is no relationship between DEA and traditional accounting ratios as measures of performance of a firm. Out results reject the null hypothesis indicating that DEA can provided by traditional ratio analysis.
In addition, the fair and square strategy as noted by pricing consultant Rafi Mohammed does not allow JCP to respond to their competitors when they reduce their prices. Whether Johnson had unveil, the “Fair and Square” slowly or in a different time sequence the result would be the same because it was the wrong strategy for that type of industry and the product it offered in the long run the result would have been the
The payback period is considered a method of analysis with serious limitations and qualifications for its use, because it does not account for the time value of money, risk, financing, or other important considerations, such as the opportunity cost . Example: Estimate for the payback period Year 0 1 2 3 4 CF -12,000 4,500 4,500 4,000 2,000
One critical example of the five forces’ flaws is in assuming the market structures are relatively static. As a matter of fact, Porters five forces model is based mainly on the economic condition. It is unable to take in consideration factors such as new business models and the dynamics of market, implying that the model is still barely applicable in the contemporary rapid market change (Prahalad and Hamel, 1990). In the present, it is inevitable that industry structure face changes continuously due to the dynamic
DCF undervalues everything because of its simplifying assumptions. DCF ignores the options to extend, contract, expand or defer investment decisions, since all expected cash flows are pre-committed. The method excludes the management flexibility that is present in real options. The method also ignores the strategic value of projects i.e. the benefit of expanding to new markets or development of new technology etc.
There are different drivers based on the nature of foreign exchange markets that can be used to impact the exchange rates, for which technical assessment serves as the important method for determining the foreign exchange returns. There are different theories and arguments that are not in favour of the use of technical analysis as the investment tool due to which the practical application is denied. According to Reitz & Taylor (2008), technical analysis is the technique, which is also regarded as charting and has been treated as part of monetary exercise from long ago. In comparison to fundamental analysis, this technique has still not gained efficiency. The one obstacle that is serious in the process of technical analysis is the subjective nature of the technique as the occurrence of symmetrical outlines in the historical price graphs is repeatedly in the eyes of the
For these reasons, dependency theorists contend that the market alone is not an adequate distributive instrument. Since the market rewards efficiency, dependency theorists markdown total measures of economic development, for example, the GDP or exchange files. Dependency theorists do not deny that monetary action happens inside a needy state. They do make a critical qualification, be that as it may, between financial development and monetary improvement. For instance, there is a more prominent worry inside the reliance structure for whether the financial movement is really profiting the country all in all.