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In many cases, there are misconceptions about their ability to provide superior results in different kinds of market conditions. Yet, there are times, when these tools have been successful in helping investment managers and professionals to exploit these disparities. In this case, more research is needed to show why so many investors believe. That hedging and derivatives are important tools in providing superior returns.
However, Qiao (2012) found that hedging strategies will vary depending upon the levels of risk investors are seeking out. This means that they will more than likely will use derivatives to reduce threats in areas such as equity securities. Whereas, those who want to obtain higher returns will utilize derivates to increase their percentage gains. (Qiao, 2012)
The information from this source is useful in demonstrating how different classes of investors' will have contrasting attitudes and uses for derivates in relation to hedging. However, to provide…
Aabo, T. (2011). Founder Family Influence and Foreign Exchange Risk. International Journal of Finance, 7 (1), 33 -- 67.
Bezzina, F. (2012). Exploring Factors Affecting the Proper Use of Derivatives. Managerial Finance, 38 (4), 414 -- 435.
Brown, G. (2001). Are Firms Successful at Select Hedging? The Journal of Business, 79 (6), 2925 -- 2949.
Khediri, K. (2010). Do Investors Really use Derivatives? Journal of Risk Finance, 11 (1), 62 -- 74.
Investor Satisfaction Case
A Business eport
INVESTO SATISFACTION EPOT
As requested, here are my findings on the investor satisfaction report as collated by our analysis department. Our investment brokerage firm is advised to follow up on the results to improve brokerage performance based on type of investment product purchased.
100 clients were randomly selected and asked a series of questions, the criteria being they must have purchased shares in any one of the funds. Investment counselors personally ask the client to rate their level of satisfaction with the product as high medium or low.
30% of our investors have invested in bond fund, 30% in the stock fund and 40% have invested in the tax-deferred annuity. We can deduce from the total population data that 40% of all clients displayed high satisfaction, 40% displayed medium satisfaction and 20% displayed low satisfaction (Table 2.17).
Stock fund clients report high satisfaction generally…
C. Blake. "The Performance of Bond Mutual Funds." Journal of Business 66 (2005), 371403.
J. Clements. "Risk-Takers Believe Leveraged Muni Funds May Provide Quick Score if Interest Rates Fall." Wall Street Journal (September 26, 2004), C2.
S. Collins and P. Mack. "The Optimal Amount of Assets under Management in the Mutual Fund Industry." Financial Analysts Journal 53 (September / October 2007), 67-73.
K. Damato. "Grenfell Funds' Woes Aren't Uncommon." Wall Street Journal (September 5, 1996), C1.
Before starting a new business venture, it is important to take into account the both the potential benefits and possible drawbacks of the new venture. The opportunities and challenges should be in appropriate balance for the business venture to be viable in terms of the future. When considering the InvestorSoft opportunity, a number of things present both opportunities and challenges. InvestorSoft offers many benefits that can be set in contrast to its competitors.
The greatest benefit that the venture might offer its clients is time savings. The service would, for example, offer significant time savings in terms of managing technical problems and waiting for IT revisions by professionals in the field. Investor relations professionals would be able to use the software to update their investor relations website without waiting for third parties to do so for them. The elimination of the wait time invested in this would then…
Kalyanaram, G. And Gurumurthy, R. (n.d.) Market Entry Strategies: Pioneers vs. Late Arrivals. Best Practice. Retrieved from: http://www.wright.edu/~tdung/entry.pdf
Market Segmentation and Positioning. (n.d.) Retrieved from: http://www.oup.com/uk/orc/bin/9780199290437/baines_ch06.pdf
Economic Impact of Cannabis
The economic-themed article chosen for this paper is from Forbes, and it takes a position that would have been considered controversial, even outrageous, just a few years ago. The writer asserts that marijuana is considered the "best start-up opportunity" for entrepreneurs in 2015. This paper will present a review and critique of the article. At the end of the bibliography the link to the story is provided. Marijuana can become a huge boost to state's economies, and in time, according to the article, many states will benefit economically.
hy Legal Cannabis Is 2015's Best Startup Opportunity
Journalist Carol Tice, who covers entrepreneurship issues and startups for Forbes, explains that helping develop the legal marijuana industry is a smart way to launch a business in 2015. Twenty-three states now have legal marijuana for medical purposes, which means with a doctor's prescription (and a state ID in many…
Tice, C. (2015). Why Legal Cannabis Is 2015's Best Startup Opportunity. Forbes. Retrieved February 9, 2015, from Forbes.com.
Below is the link to this story -- not the link to Forbes per se.
The following hypotheses are proposed to focus the research:
Ho: There is no relation between investors' level of knowledge of derivatives hedging and their perceptions of asset managers' strategies.
H1: Investors with high levels of knowledge of derivatives hedging perceive their asset managers' strategies more positively than do investors with lower levels of knowledge about derivatives hedging.
Ho: There is no relation between variation in managerial disclosure parameters and the reactions of investors to earnings surprises.
H1 Increases in the frequency or duration of managerial disclosure parameters are associated with greater levels of acceptance and positive perception of earnings surprises by investors.
In order to gather information about how research participants perceive derivatives hedging, the sample population will be asked to respond to a survey. Both active and non-active users of derivatives will respond to a semi-structured questionnaire. The questionnaire items will be designed to measure the…
Afifi, A., Clark, V. And May, S. (2004). Computer-Aided Multivariate Analysis. 4th ed. Boca Raton, FL: Chapman & Hall/CRC.
Bezzina, F. And Grima, S. (2012). Exploring factors affecting the proper use of derivatives: An empirical study with active users and controllers of derivatives. Managerial Finance, 38(4), 414-434. (Emerald Group Publishing Ltd.).
Reynolds-Moehrle, J. (2005). Management's disclosure of hedging activity: An empirical investigation of analysts' and investors' reactions. International Journal of Managerial Finance, 1(2), 108-122.
Saunders, M. (2003) Research Methods for Business Students. New York, NY: Pearson Education.
Customer vs. Investors.
To begin, customers are the central component of any successful business. A relentless approach to customer satisfaction is what has created some of the world's greatest companies. To be successful, corporations must address a specific need by a customer, and satisfy that need better than the competition. As such, investors prosper as the companies they own perform well for the customer. This is the only manner in which investors can prosper. If customer needs are not being adequately addressed, the investor suffers as consumers leave to a competing firm. Therefore, it is my belief that John McKay is correct in his assertion that companies must put customers ahead of investors (Pride, 2008).
Investors exist only because there is a viable market for the goods and services their companies provide. If no demand for these services existed, investors would subsequently not exist. By providing these services investors deserve…
1. Kali-ski, B. (Ed.). Ethics in Management. (2001). Encyclopedia of Business and Finance (2nd ed., Vol. 1). New York: Macmillan Reference.p.2. Swire, 1997
2. Armstrong, Scott (1977). "Social Irresponsibility in Management." Journal of Business Research (Elsevier North-Holland Inc.) 15: 185 -- 213.
3. Carpenter, M., Bauer, T. & Eiderdown, B. (2010). Principles of Management v1.1. Arlington, NY: Flat World Knowledge.p.3.
4. Pride, William M., Hughes, Robert James, & Kickapoo, Jack R. (2008). Business (9th ed.) Boston, MA: Hough-ton McFarland Company. ISBN 0-618-77091-7
Satisfy Its Investors, Cash-ich Apple Borrows Money, authors Peter Lattman and Peter Eavis provide insights into why Apple senior management chose to initiate and complete a record-sized bond deal of $17B. One of the primary motivations for amount of bond debt taken on by Apple is to stabilizing their continually dropping stock price, a concern of public and private or institutional investors alike (Mackenzie, odrigues, 2013). Apple has said that this bond issue is part of a planned $100B payout to investors by 2015, which is a core part of their strategy to retain institutional investors as the largest percentage of their stock ownership (Seitz, 2013). The intent of this analysis is to provide an overview of the article To Satisfy Its Investors, Cash-ich Apple Borrows Money followed by an analysis of the article and discussion of its relevance to financial management.
The article provides a synopsis of…
Burne, K., & Cherney, M. (2013, May 01). Apple's record plunge into debt pool. Wall Street Journal.
Mackenzie, M., & Rodrigues, V. (2013). Apple cleans up with $17bn U.S. bond issue. FT.Com,
Seitz, P. (2013, Apr 30). Apple sells $17 billion in bonds in historic offering. Investor's Business Daily.
Are investors' legal remedies enough?
During the 1990s, a wave of legislation substantially deregulated the financial industry, effectively limiting the ability of investors to seek legal remedies in the wake of corporate fraud, and freeing corporations to take greater risks with 'other people's money.' The Private Securities Litigation eform Act of 1995 (PSLA) overturned the protections once provided by the 1934 Securities Exchange Act (Nations 2012). Then-President Clinton vetoed PSLA, and as predicted, since its passage, "many citizens seeking redress for losses as a result of negligent or intentional misrepresentation, fraud, breach of fiduciary duty, or other misconduct in the purchase, sale, or offer for purchase or sale of securities have found their federal rights substantially reduced and have been forced to seek redress under state rather than federal law" (Nations 2012). PSLA allowed corporations greater legal protection if they inserted a disclaimer that projected future profits were uncertain,…
Hiltzik, Michael. (2012). We need a stronger Glass-Steagall Act to regulate financial firms.
LA Times. Retrieved: http://articles.latimes.com/2012/may/30/business/la-fi-hiltzik-20120530
Nations, Howard. (2012). Remedies for wronged investors. The Nation Blog. Retrieved:
This is because the majority of investors will more than likely focus on analysts' forecasts and remaining to close company estimates. This is problematic, because it means that investors and traders will tend to under react in the stock. Where, the philosophy that is used by Numeric Investors can spot when changes that are taking place in the momentum of the company early. At which point, they can either go: long or short and then ride the stock all the way up / down. Once this occurs, it means that the overall return is greater, by taking advantage of the different anomalies. ("Numeric Investors," 1997)
The Value Strategy
Over the years, Numeric Investors also discovered that many of different momentum and value orientated stocks moved in a similar fashion. As the strategy could identify what specific stocks would be the best candidates to realize the projected price targets, while ignoring…
Numeric Investors. (1997). Harvard Business School.
From an investor's perspective, what is the most important information on the income statement? Why? From management's perspective, what is the most important information on the income statement? Why?
The income statement, also called the profit and loss statement is the financial statement that details a company's sales and earnings. When evaluating an income statement, the savvy investor usually wishes to maximize his or her immediate or long-term ability to make a profit on a stock. Thus, conventional wisdom holds that investors should buy when a stock's price to earnings ratios are low and sell when these ratios are high. In other words, if a stock stands to earn a great deal and has a strong track record of doing so, yet is priced relatively cheaply in relation to those future earnings, it is wise for an investor to buy that stock. The reverse is true as well, though…
Exchange Traded Funds offer market participants with a low-cost alternative to mutual funds and other portfolio management tools. Exchange Traded Funds are primarily used by investors to gain exposer to a particular industry, market, or product category. Funds can range from the highly popular S&P index offered by Vanguard to the more esoteric funds such as the 3x Leverage Dow Funds. Generally speaking, ETFs can lower investor risk by providing then with a security that is diversified such as the Nasdaq ETF or the S&P 500 ETFs. Here investor hold a subset of American business and benefit in proportion to their respective indexs performance over time.However, of late, investors are using ETF not as an investment vehicle but as a gambling or speculative investment. Here, the risk is much higher as many investors do not take the time to read the prospectus to properly ascertain what they are holding. In…
1. Ackert, L. F., & Tian, Y. S. (2008). Arbitrage, liquidity, and the valuation of exchange traded funds. Financial markets, institutions & instruments, 17(5), 331-362
2. Avellaneda, M., & Zhang, S. (2010). Path-dependence of leveraged ETF returns.SIAM Journal on Financial Mathematics, 1(1), 586-603.
The type of business that Jake is pitching to the sharks is a restaurant business that is a cultural blend of Asian (Korean) and Mexican food: Jake calls it Chi’Lantro and it serves Korean BBQ tacos out of food trucks and restaurants. The entrepreneur’s offer is 15% of his business for $600,000.
4 of the 5 sharks passed on the offer. One said that he was not into growth capital but rather was into helping to launch a new idea: he did not see Chi’Lantro as really being a new idea, so he passed. Another said he did not like investing in restaurants because of the constraints on the business model—such as location (if location is not good, the business suffers and that eats at the investment). Two others said they did not like investing in restaurants because there is too much risk, too much involvement that is…
High liability balances might indicate that a company is not in a very secure position going forward; however, it depends on what kind of company it is. If it is a growth company, which is projected to grow earnings exponentially in the coming years, high liability balances might not be a bad sign. For example, Netflix had high liability balances for many of its early years, and many were skeptical of its growth potential, particularly because it failed to show much revenue. However, it continued to grow subscribers and put its competition out of business by killing off Blockbuster. On the contrary, it could indicate that lenders and investors are satisfied with the company’s business plan and thus do not see the liabilities as a problem. However, if the company is in the decline phase of its life cycle, high liability balances could mean that bankruptcy is imminent, especially if…
Hama, A., & Santosa, H. P. (2018). Effect Of Working Capital, Company Size, And Company Growth On Profitability And Company Value. PEOPLE: International Journal of Social Sciences, 4(2).
Financial statements are the primary way for an investor, creditor, and other financial statement users to evaluate a company's financial performance, financial stability, profitability, and net worth to determine whether putting investments in the company would provide profitability and adequate return on investments (Way, 2013). Financial statements are also a way for managers to communicate achievements in performance to potential investors and creditors. The various statements brings various information components in the determination of evaluating companies for potential investments.
In evaluating Apple, Inc., the Income Statement shows net income for 2012 at $41,733 million (Form 10-K, 2012), up from $25,922 million in 2011. The income statement reports sales, expenses, and profits or losses. This is important to an investor because it shows results from operations in how profitable a company has been for the particular period. y evaluating present results against past performance, investors can assess for uncertainty…
Form 10-K. (2012, Sept 29). Retrieved from Apple, Inc.: http://files.shareholder.com/downloads/AAPL/25...21359901x0xS1193125-12-444068/320193/filing.pdf
Way, J. (2013). What is the importance of a company's financial statements? Retrieved from Chron: http://smallbusiness.chron.com/importance-companys-financial-statements-21332.html
Some investment assets have a diversifiable risk and some have an undiversifiable risk involved. Diversifiable risk is specific to a particular security or sector, so its impact on a diversified portfolio is limited to that particular security (moneyterms.co.uk). For example, a financial crisis in a country can cause diversifiable risk on the investments pertaining to the financial institutions. Undiversifiable risk is the tendency of stock prices to decrease, which is caused by something that affects returns on all stock in the same manner, such as war or an interest rate change (Legal).
A substantial unexpected increase in inflation would be an undiversifiable risk because it is common to an entire class of assets or liabilities, or all the stock on the market. It is also considered a market risk or a systematic risk. The economy expects prices to rise slowly over a period of time. That goes along…
Investopedia. A Beginner's Guide to Hedging. 19 Feb 2010. article. 07 July 2012.
Legal, U.S.. Undiversifiable Risk Law & Legal Definition. n.d. Article. 08 July 2012.
moneyterms.co.uk. Diversifiable Risk. n.d. blog. 08 July 2012.
A new area that a public relations specialist in investor relations must deal with in the current environment is that of the new phenomenon of grass-roots Internet reviews. "Companies have always had to deal with complaints and criticisms -- both deserved and not. But the Internet has drastically increased the potential damage to a brand or a company's reputation. Frustrations with a company's practices, products and service that once were confined to relatively small circles now reach complete strangers around the world" (Martin & Bennett 2008: 6). Many companies have taken a disastrous 'do nothing' approach or have simply underestimated the influence of the speedy new media to transmit negative and positive buzz about good and bad investment prospects: "The majority of companies we contacted were either unaware their company was the subject of attacks or were taking a 'wait-and-see' approach in deciding what to do about it (Martin &…
Dowling, Graham & Warren Weeks. (2008, Spring). What the media is really telling you about your brand. MIT Sloan Review. 49. 3.
Christopher L. Martin and Nathan Bennett (2008, March 10). What to do about online attacks.
Wall Street Journal (Eastern Edition), p. R.6. Retrieved June 8, 2008, from ABI/INFORM Global database. (Document ID: 1442818571).
UC Irvine extension presents first and only online program in investor relations." (15 Jun
However, many investors will still find saving bonds to be a better option than Treasurys. hile bonds can lock up money for a long time, investors can cash out with minimal penalties after a year and with no penalty after five years. In contrast, Treasurys lock investors into a set term, and early sellers are at the mercy of the market, plus they face the possibility of service charges. However, for investors seeking to create laddered security portfolios, the Treasury program could be very useful.
At this time in my life, I do not think I will be taking advantage of the new availability of $100 Treasurys. I am looking for more aggressive savings options, not the safe haven offered by Treasurys, savings bonds, or traditional savings accounts. Since it does not appear that Treasurys will keep up with short-term inflation, I will not be using this option.
Jaffe, Chuck. "Piece of the Treasury for $100: Bills, Notes, Bonds Easier to Get, but Do You
Want Them?" Wall Street Journal 12 Apr. 2008: B2.
Therefore the international agencies have recommended certain laws and regulations which try to bridge both the parties, and avoid any tussle or clash of interest. According to the proposed laws, the countries and ruling authority should seek quarterly reports from the multinational companies for explaining their production activities, secondly the companies should be encouraged to invest funds towards the social and economic prosperity of the local population, and in exchange the ruling authority should offer the company with possible concession in terms of taxation or import duty. In different countries, including China, the hub of foreign investment, the country seek periodic reports from its investors about their operations, and offers maximum concession to those companies that have promised and provided economic prosperity to the local citizens. (Larry Kahaner (2003). Values, Prosperity, and the Talmud: Business Lessons from the Ancient abbis. Longman Publishers).
ichard F. Kaufman (1996). The War Profiteers.…
Richard F. Kaufman (1996). The War Profiteers. Oxford Publishers
Alvin Saunders Johnson (2002). Encyclopedia of the Social Sciences. Cambridge Publishers.
Ramananda Chatterjee (2001). The Modern Review. Princeton Hall.
Larry Kahaner (2003). Values, Prosperity, and the Talmud: Business Lessons from the Ancient Rabbis. Longman Publishers.
Over the last several years, the portfolio theory has been used as a way to help corporate investors analyze different securities and determine the impact of specific investments on their total returns. This is when a firm will construct a portfolio of securities which are based upon expected returns associated with certain levels of risk. During this process, there are four steps that are involved to include: security valuation, asset allocation, portfolio optimization and performance measurement. ("Modern Portfolio Theory," 2013)
These different areas reduce volatility and enhance the total returns for corporate investors. To fully understand these ideas requires: carefully examining the effects of the theory in relation to the risks of a security and the overall costs of capital to firms. Together, these elements will highlight why this approach has become so popular with corporate investors. ("Modern Portfolio Theory," 2013)
The effect of the portfolio on risk…
Modern Portfolio Theory. (2013). Investopedia. Retrieved from: http://www.investopedia.com/terms/m/modernportfoliotheory.asp
Elton, E. (2009). Modern Portfolio Theory. Hoboken, NJ: Wiley.
Francis, J. (2013). Modern Portfolio Theory. Hoboken, NJ: Wiley.
Scherer, B. (2005). Modern Portfolio Theory Optimization. New York, NY: Springer.
An investor choosing between two different companies must undertake several steps in order to determine the best investment. In addition to understanding the industry of the company from a strategic perspective, a thorough financial analysis should be conducted. The strategic analysis will help to understand the underlying trends of the financial assessment. The financial analysis should include a ratio analysis, and should focus on the key areas of liquidity, solvency, leverage and profitability. In addition, the performance of the company's equity should be analyzed, particularly in relation to the company's financial performance. This will help to determine if the current share price is good value. This report will analyze two different companies -- Marks & Spencer and Tullow Oil -- using these criteria. There will also be a brief corporate social reporting analysis.
Marks & Spencer Overview
M&S is a department store retailer based in the UK, but operating…
Marks & Spencer 2010 Annual Report. Retrieved February 11, 2011 from http://annualreport.marksandspencer.com/overview/about-us.aspx
Yahoo! Finance: Marks & Spencer. Retrieved February 11, 2011 from http://finance.yahoo.com/q/bs?s=MKS.L+Balance+Sheet&annual
TullowOil.com. (2011). Retrieved February 11, 2011 from http://www.tullowoil.com
Yahoo! Finance: Tullow Oil. Retrieved February 11, 2011 from http://finance.yahoo.com/q/is?s=TLW.L+Income+Statement&annual
California Clinics, an investor-owned chain of ambulatory care clinics, just paid a dividend of $2 per share. The firm's dividend is expected to grow at a constant rate of 5% per year, and investors require a 15% rate of return on the stock.
What is the stock's value?
PO = D 1 / ( KS - G )
P PO = Price
D1 = The next dividend. D1 = D0 (1 + G)
KS = Rate of Return
G = Growth Rate=D1/(Ks-G)
P = 2.10 / (15% - 5%)
P = $
Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13%. Under these conditions, what is the stock's value?
P = 2.10 / (13% - 5%)
P = $26.25
Return to the original 15% required rate of return and assume a dividend growth rate estimate increase to 7% per year, what…
Entrepreneur-Why investor would give me capital to start a decorating den?
With the spiraling demand for housing, the demand for interior decoration market is also rising in tandem. Concern regarding making the home interiors beautiful and plush is high on the wish list of many home-buyers. Modern and aware customers who view popular channels on TV dedicated to interiors and subscribe to the magazines flooding the market are valuing the quality of interior decorating in an increasing manner than ever before. ising on this demand for interiors among the people is a great opportunity to take up the Franchise offer of Decorating Den. It is an investment in the future compared to other franchise offered in the market and a completely new way of life. (Opportunities in a New Economy - Message from the President)
Convincing the Venture Capitalist for guaranteed profitability:
By taking up the franchise, owners of Interiors…
"A Beautiful Business" Retrieved from http://www.decoratingden.com/Bbusiness.shtml Accessed on 17 February, 2005
"Interior Views: Sample Plan" Retrieved from http://www.paloalto.com/sampleplans/MPP6/enu/Live/InteriorViews-mpp_Live.pdf
Accessed on 17 February, 2005
"Is the Business for you" Retrieved from http://www.decoratingden.com/foryou.shtml Accessed on 17 February 2005
eal Options Valuation
Market investors often carry out their research in a sell side or buy side method. Sell side carry out their investment research to enable them satisfy buy side customers. They carry out this research to generate business or reach the goal of generating transactions. The buy side follows the prospective of banking customers as away of attracting new customers and a service to past customers. Sell side firms sell IPO's and services to the buy side companies.
Buy side and sell side
Buy side reports produced in house consumption are used by colleagues to the analyst. These colleagues can be corporate development executives and development and portfolio managers. Sell-side reports done by firm analysts are vastly distributed than the buy side reports. Sell side reports should be clear because of their wide distribution, while by side reports should be simple and brief because company's management uses them.…
Albrran, B.S. (2009). Handbook Of Media Management Aand Economics. Atlanta: Routledge.
Amram, M. (2002). Value Sweep. Atlanta: Havard Business Press.
Hook, C. (2010). Security Analysis And Business Valuation On Wall Street. New York: John Willey and Sons.
Marion, A. (2003). Real Options In Practice. New York: John Willey and Sons.
Investing in Economies: The Risk-Averse Investor
A risk-averse investor is looking for the least amount of volatility coupled with consistent gains. This means that this investor would prefer a very safe investment that returns a couple of percentage points per year over a very risky investment that could potentially return ten or twenty percent. Also, a risk-averse investor is looking to help balance any losses with gains in other sectors. This would help point to a preferred type of economy, out of the two listed that the investor has to choose from.
The second economy, where "stock returns are independent one stock increasing in price has no effect on the prices of other stocks" would be a better investment route for such an investor. This is not to say that the other option could not be lucrative, but in diversification, the portfolio is better balanced to absorb losses in one…
Gollier, C. (2004). The Economics of Risk and Time. MIT Press: Boston, MA. Pp. 307.
Mankiw, N.G. (2007). Essentials of Economics. Thomas Higher Education: Mason, OH. Pp. 417.
Another area that can be discussed in this section is the evidence of improvement in other after-school programs throughout the country. According to a study conducted by the University of California,
A two-year longitudinal Study of Promising After-School Programs examined the effects of participation in quality after school programs among almost 3,000 youth in 35 elementary and middle school after school programs located in 14 cities and 8 states. New findings from that study indicate that elementary and middle school students who participated in high-quality after school programs, alone or in combination with other activities, across two years demonstrated significant gains in standardized math test scores, when compared to their peers who were regularly unsupervised after school. Further, regular participation in after school programs was associated with improvements in work habits and task persistence. (Vandell, 2007)
The final area that investors are particularly interested in is whether their funds are…
Gardener, M., Roth, J., Brooks-Gunn, J. (2009). Can After-school Programs Help Level the Academic Playing Field for Disadvantaged Youth? Columbia University: Campaign for Educational Equity. Available at http://cms.tc.columbia.edu/i/a/document/11242_After-school_report_10-7-09_web.pdf
Vandell, D., Reisner, E., & Pierce, K. (2007). Outcomes linked to high-quality afterschool programs: Longitudinal findings from the study of promising practices. Irvine, CA:
University of California and Washington, DC: Policy Studies Associates. Available at http://www.gse.uci.edu/docs/PASP%20Final%20Report.pdf
efficient market hypothesis and its relation to securities prices, their response to new market information, investor opportunities, and behavioral finance challenges.
hat does the efficient market hypothesis say about a) securities prices?
An efficient market is one in which "the market price of a security is an unbiased estimate of its intrinsic value" (Chandra, 2008). That is not to say that the market price for a security will equal its intrinsic value all the time. But what it does say is that there will be errors in market prices but they are not biased; and it does also say that while the price of securities can and will diverge from the intrinsic value of the securities but that deviation will be (in most cases) random. The divergence of the price from the intrinsic value will not be linked "with any observable variable" (Chandra, 422).
Because the deviations of the market…
Beggs, Jodi. "The Efficient Markets Hypothesis." About.com. Retrieved July 29, 2014, from http://economics.about.com . 2011.
Chandra, Prasanna. Financial Management. Delhi, India: Tata McGraw-Hill Education, 2008.
Kiplinger. "Can you beat the stock averages? Whole-house fans can cut cooling costs.
Singles need estate plans, too." Changing Times. 1980.
Miller, Winchel and Koonce (2015) made use of psychology research (which encapsulates an important derivatives context element - that organizational leaders display careful decision-making and, hence, have a right to employ derivatives), to posit that financial backers' perceptions of companies utilizing derivatives is based on company or industrial norms. The contention is that if companies suffer a negative result owing to its derivative action, financiers will more favorably assess the company, believing that its executives were more careful and had a sound basis for their choice, if derivative application is in line with company or industrial norms, as opposed to contradicting the norms. That is, the authors posited that company or industrial norms systematically changed the way an investor perceived a company's derivative usage.
In a Turkey-specific study, authors Ayturk, Yanik and Gurbuz (2016) studied the application of rate of interest, currency, commodity and other financial derivatives, together with its…
Ayturk, Y., Gurbuz, A., &Yanik, S. (2016). Corporate derivatives use and firm value: Evidence from Turkey. Borsa Istanbul Review, 108 - 120.
Hoffman, A., Post, T., &Pennings, J. (2015). How Investor Perceptions Drive Actual Trading and Risk-Taking Behavior. Journal of Behaviour Finance, 94 - 103.
Iqbal, Z. (2015). CEO age, education, and introduction of hedging in the oil and gas industry.Journal of Economics and Finance, 189 - 200.
Koonce, L., Miller, J., &Winchel, J. (2015).The Effects of Norms on Investor Reactions to Derivative Use.Contemporary Accounting Research Conference.CAAA.
Venture capitalists willing to take a risk on a dicey venture like developing a new drug and angel investors with a personal stake in developing a new, potentially life-saving product could provide better financial resources.
The choice of 'C' reflects the high-level scientific knowledge required to create a new drug and the equally profound need to solicit and wisely use financial resources during the development process. Management should also know how to navigate the potential bureaucratic red tape a new drug is likely to encounter before government approval. Academically-driven scientists may not understand how to 'pitch' the drug to investors, or even to explain the drug's utility to laypersons in Congress, when soliciting funding or regulatory approval. However, the most potentially damaging management team would be that of young MBAs with little knowledge of the lengthy nature of the drug development process. They might show frustration with the…
Financial statements allow investors to compare the performance of different publicly-traded companies. This is because there are specific rules that govern how each company can compile and present its statements, and these rules are enforced by the SEC. Two companies that compete in the mobile operating system and online advertising businesses are Apple and Google. This report will compare these two companies, using the financial statements for each for the 2012 fiscal year. The balance sheet will be the specific area of comparison.
For both companies, the last few years have been exceptionally profitable, and this is noted on the balance sheets of each. Both companies have had their assets and their equities increase significantly over the past few years as a result of their profits. The current assets for both companies have expanded, indicating that the operating business of each company has grown significantly. As well, the total assets…
MSN Moneycentral: Apple (2013). Retrieved April 9, 2013 from http://investing.money.msn.com/investments/stock-balance-sheet/?symbol=us%3AAAPL&stmtView=Ann
MSN Moneycentral: Google (2013). Retrieved April 9, 2013 from http://investing.money.msn.com/investments/stock-balance-sheet/?symbol=us%3AGOOG&stmtView=Ann
party transactions reported on by Arthur Andersen & Co.
Related party transactions are essential transactions between closely related parties or individuals. Although not blatantly wrong in isolation, they can be particularly harmful if the practice is abused. The error with Enron's disclosure is that it was not clear enough. Investors, analysts and creditors could not properly ascertain the extent of the related party transactions at Enron. This was particularly true as the company did not want anyone to know about it. As a result the company was able to hid billions of dollars of off balance sheet debt from investors. This resulted in large, unknown exposures to investors. Arthur Anderson looked the other way in regards to informing investors about these exposures. They classified many of the entities that held the excessive amount of debt as special purpose entities. With the help of Arthur Anderson, Enron avoided consolidated the results…
Warren Adams had 60,000 acres of land in Patagonia, Chile, and had the plan of ensuring 15% internal rate of return on investment by conducting various revenue streams, from eco-tourism to carbon credits, water rights, sustainable land development, etc. He had raised $20 million in capital from high networth investors (HNWs) but was being blocked by institutional investors who were less willing to run the risk on investment that they saw with Adams' Patagonia Sur. Managing so many different revenue streams would be highly difficult and they viewed Adams' plan as unlikely to do more than break even yearly. HNWs were not as concerned with the risk because they were not on a deadline to have a return on investment and were willing to let the money sit in the property, which would increase in value over the coming decades; thus, for them the risk was mitigated. For…
Segel, A., Ibanez, N., Verjee, J. (2012). Patagonia Sur: For-Profit Land Conservation in Chile. Harvard Business School.
asset classes, setting out their characteristics and risks.
Australian shares are shares in the market of publicly traded companies that range from small to medium to large-cap stocks. Shares can or cannot provide dividends to shareholders, depending on their makeup. Shares can increase or decrease in value, depending on a number of factors ranging from fundamental valuation to market or sector conditions, to laws of supply and demand to market psychology, momentum and stop-hunting algorithms. Trading shares in today's market conditions can be viewed as more perilous than ever before because of the inherit risk of losing to HFTs, of improperly hedging one's investment and being exposed to downside risk, and of improperly diversifying or investing in the wrong sector or company at the wrong time (for example, as it is poised to pull back, collapse, or be diluted through toxic debt).
Australian bonds can come in the form of…
Anderson, E. (2016). Investors 'go bananas' for gold bars as global stock markets tumble. Telegraph. Retrieved from http://www.telegraph.co.uk/finance/personalfinance/investing/gold/12151770/Investors-go-bananas-for-gold-bars-as-global-stock-markets-tumble.html
Chen, W., Chung, H., Ho, K., Hsu, T. (2012). Portfolio optimization models and mean-
variance spanning tests. In Handbook of Quantitative Finance and Risk Management. NY: Springer.
Collum, D. (2015). Year in Review. Peak Prosperity. Retrieved from http://www.peakprosperity.com/blog/95808/2015-year-review
Unfortunately, determining which fund to go with for a retail investor is difficult, as there are many unscrupulous fund managers who might seek to take advantage of the fact that they are playing with other people's money and making (at least) the management fee. This can lead even scrupulous hedge fund managers to take unnecessary risks.
The danger of hedge funds being mismanaged truly cannot be overstated. For example, Bernie Madoff ran a large exclusive fund and while it was a Ponzi scheme, which while illegal and with "fantasy returns," that sophisticated investors most certainly should have realized were not realistic, Madoff continued to be able to bring in investors. However, Madoff's investors were all relatively financially sophisticated people with huge assets. While his scheme caused them financial damage, the damage was manageable and it was confined to a group of people with assets that greatly outstripped those of the…
Agarwal, V 2009. "Hedge funds for retail investors? An examination of mutual funds," Journal
of Financial and Quantitative Analysis, vol. 44, no. 2, pp. 273-305. Available from:
. [27 February 2012].
Gross, P 2012. Narayan Naik looks at hedge funds and investment portfolios. Available from:
Ideally, mutual funds should represent variety of market sectors throughout the world, to cushion the investor against regional recessions.
Another psychological buffer for the cautious investor is to think of categories of investments, rather than investments in a holistic manner, such as fail-safe investments, long-term growth or retirement money (invested in stocks), and higher risk investments.
This balance will shift with the investor's age, financial profile, and willingness to tolerate uncertainty and speculation. Also, investors may want to consider holding some index funds along with more actively managed mutual funds so as to not miss out on any general market booms, although this does have the downside in that the investor will also experience every market…
The investors have responsibility to invest based on the social needs. The retail investor, can for example is thus a person who buys socially responsible unit trusts or mutual funds. Actually the investment that is being touted as responsible investment is the work of socially beneficial institution like pension funds, and some charitable foundations. Normally the institutional investors do not enter the socially responsible investment scenario. Of late however the new approaches to fund investment by the institutions have bordered on social concerns. The issues of institutional investment are more complicated and diverse than the retail funds. (Sparkes, 2002, p. 117)
There are many other investment opportunities available to the retail investor without incurring the risk but at the same time gaining efficiency in value without hedging. The retail investors thus are better off in those segments and hedging must not be opened to them. There are ample other investment…
Barnes, Ryan. 2007. Hedge Funds Go Retail. Investopiedia Online,
http://www.investopedia.com/articles/mutualfund/07/mutual_fund_retail.asp#axzz1naDnVsEo accessed 4 March 2012.
Bogle, John C. 1999. Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor. Wiley: New York.
Brouwer, Gordon De. 2001. Hedge Funds in Emerging Markets. Cambridge University Press: Cambridge, England.
fictional firm (RMD) can be able to offer pre-IPO's to investors. This is accomplished by looking at the way various policies can be implemented that is in compliance with the Securities Act of 1933 along with the Securities and Exchange Act 1934. Once this occurs, is when we can be able to see how they can create a unique market that will address this demand from retail and institutional investors.
Over the last several decades, demand for pre-IPOs (initial public offerings) has been increasing exponentially. Part of the reason for this, is because there has been a shift in the focus of investors. As a large number are realizing that they can make significant returns by investing in these companies before they are going public. Evidence of this can be seen by looking at the below table which is highlighting how high investor demand for pre-IPO's had an impact on…
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" (edhead 2008) (Manow 2001)
These factors are showing how institutional investors are playing an important part in offering additional amounts of liquidity to a variety of businesses. This helps them to address a number of issues they are facing ranging from managing strategic acquisitions to having additional financing for bringing new products or services in the marketplace. When this happens, these organizations become more competitive and flexible in meeting the needs of customers. (Manow 2001)
Institutional investors and the short-termism theory
However, one the biggest criticisms of the role of institutional investors is they are encouraging companies to focus on meeting short-term objectives. This is because all investors want to see an increase in their profit margins. When this happens, the price of the stock will move higher from these favorable perceptions. During the annual proxy vote (for the board of directors), this ensures that they will be reelected…
Bhojraj, S, 2003, 'The Effects of Corporate Governance,' the Journal of Business, vol. 76, no.3, pp. 133 -- 142.
Davis, E, 2002, 'Institutional Investors, Corporate Governance and the Performance of the Corporate Sector', Economic Systems, vol. 26, no. 3, pp. 203 -- 229.
Manow, P, 2001, Comparing Welfare and Capitalism, Psychology Press, London.
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Financial Contracting for New Venture:
Investments in a new venture usually involve financial contracts between the entrepreneur and external investors. These external investors include venture capitalists, angel financiers, banks, private financing companies, and credits unions among others. Notably, financial contracts can have positive and negative effects on the new venture. For instance, an angel financier can add a clause on the financial contract that will not permit the entrepreneur to borrow more funds without permission from the lender. While this is likely to occur when the lending institution has a mortgage or lean on the venture's property, the clause is usually added to lessen foreclosure risk. As an individual seeking to venture in a clothing business for the Mixed Martial Arts customers to provide shirts, hoodies/fleeces, and hats, it is important to choose the most appropriate type of financial contracting with the external investor. This process of selecting the most…
Anderson, C. (2013, January 25). 8 Things You Need to Know About Starting A Fashion
Business. The Huffington Post. Retrieved January 10, 2014, from http://www.huffingtonpost.com/2013/01/24/starting-a-fashion-business_n_2534518.html
de Bettignies, J. (2008, January). Financing the Entrepreneurial Venture. Management Science,
54(1), 151-166. Retrieved January 10, 2014, from http://web.business.queensu.ca/faculty/jdebettignies/docs/EntrepFinPrintedVersion.pdf
How firm raise capital by using venture capital? What conditions we need to raise capital by using venture capital?
Many startup companies are not mature enough to obtain capital from the public or secure a loan with the local banks in their area. They therefore, have to rely on venture capital as a way of raising capital for the firm to continue with the daily operations. Firms hence, raise capital by going out and looking for people who are willing to invest their money in a company that they see has the potential for growth. The company looks for a number of people who can pitch in large amounts of money depending on the nature and type of the business which if successful is expected to give above average returns to investors (Krishnan & Ivanov et al. 2011).
There exist certain conditions for a firm to secure capital…
Krishnan, C.V., Ivanov, V.I., Masulis, R.W., & Singh, A.K. (2011). Venture Capital
Reputation, Post-IPO Performance, and Corporate Governance. Journal Of Financial & Quantitative Analysis, 46(5), 1295-1333.
Hsu, Y. (2010). Staging of Venture Capital Investment: A Real Options Analysis. Small Business Economics, 35(3), 265-281.
Hopp, C. (2010). When Do Venture Capitalists Collaborate? Evidence on the Driving Forces of Venture Capital Syndication. Small Business Economics, 35(4), 417-431.
It is important to keep paid-in capital separate from earned capital (retained earnings) because they are two different forms of capital. For the investor, it is important to understand the differences between the two. Paid-in capital is the capital that the stockholders have paid into the business. Earned capital is the capital that has accumulated from the firm's earnings (Kieso, eygandt and arfield, 2007). Thus, the latter is a measure of how much money the firm has made while the former is a measure of how much money the firm has raised.
It is important to keep these two forms of capital separate because they derive from two different activities. On the cash flow statement, for example, paid-in capital would be a financing cash flow while earned capital would be a combination of operating and investing flows. By maintaining a clear distinction between the two, the exact nature…
Kieso, D.E., Weygandt, J.J., & Warfield, T.D. (2007). Intermediate accounting, (12th ed.). Hoboken, NJ: John Wiley & Sons.
32, and Pepsi's ratio is .29. These are close, but suggest that Pepsi is actually able to generate more revenue for every dollar of property and equipment it owns.
This makes sense given the operational differences at these companies; as noted above, Coca Cola does not actually own or operate all of the production elements for its products, thus it makes sense that is has much lower property values than its rival Pepsi, which is more fully integrated (Coca Cola, 2012; Pepsi, 2012). This also suggests, however, that Pepsi's revenue generation and overall value is more tied to its physical properties, plants, and equipment than is Coca Cola, meaning expansion could ne more costly for the company (Palepu, 2007). In this way, productivity might not transfer into long-term efficiency and profitability, which is something both investors and competitors should consider.
If determining human resource and plant/equipment productivity was…
Coca Cola. (2012). 2011 Annual Report. Accessed 1 April 2012. http://www.thecoca-colacompany.com/investors/pdfs/form_10K_2011.pdf
Fitz-enz, J. & Davison, B. (2002). How to Measure Human Resource Management. New York: McGraw Hill.
Palepu, K., Healy, P., Bernard, V. & Peek, E. (2007). Business Analysis and Valuation. Mason, OH: Cengage.
Pepsi. (2012). 2011 Annual Report. Accessed 1 April 2012. http://www.pepsico.com/annual11/downloads/PEP_AR11_2011_Annual_Report.pdf
One of the most common challenges that firms will face is taking a company public. This is because the timing must be right and there needs to be clear objectives as to where new investment capital will be utilized. Those firms that are taking these factors into account will have a more successful initial public offering (IPO). In the case of Avaya, the company is considering an IPO in the near future. However, there are challenges in determining what tactics should be utilized to attract the most interest. To decide this requires examining: the type of investors that Avaya is trying to draw, the lesson learned from the Google / Morningstar IPOs, the advantages of each type and the costs / risks. Together, these different elements will provide the greatest insights as to how Avaya should go public.
The type of investors Avaya is likely to attract
Hot Issue. (2012). Investopedia. Retrieved from: http://www.investopedia.com/terms/h/hotissue.asp#axzz1pxFFOPLB
Traditional IPOs vs. Auction-Based IPOs. (2011), Im Invest. Retrieved from: http://www.iminvest.com/traditional-ipos-vs.-auction-based-ipos/
Traditional IPOs vs. Auction-Based IPOs. (2012). Esortment.com. Retrieved from: http://www.essortment.com/traditional-ipo-vs.-auction-based-ipo-24886.html
Carter, A. (2005). Morningstar follows Google's lead. Business Week. Retrieved from: http://www.businessweek.com/bwdaily/dnflash/jan2005/nf20050110_8372_db035.htm
Business Environment in Taiwan
Taiwan is an island situated approximately 180 kilometers (Eastern Asia) away from southeastern coast of mainland China. Having a geographical area of 35,883 Km2, Taiwan is officially part of the Peoples epublic of China (PC) although there is much tension between Taiwan and China regarding statehood of Taiwan. The U.S. however does not acknowledge Taiwan as a separate state. Taiwan has a population of 23 million (consisting three main ethnic groups i.e. Taiwanese, Mainland Chinese, and indigenous people) and Taipei is the capital city of Taiwan. Of late, relations between Taipei and Beijing have been cordial. Taiwan follows a civil law system and has a multiparty democracy as governance system (Department of Investment Services, 2013). Being a thriving economy based on hi-tech industrial base and trade relations with most of the developed world, the country is deemed an important destination by multinational corporations (MNCs) for the…
Chow, G., & Lin, A.L. (2002). Accounting for economic growth in Taiwan and Mainland China: a comparative analysis. Journal of Comparative Economics,30(3), 507-530.
Council for Economic Planning and Development & MOTC. (2013). Taiwan lowers Threshold for establishment of international airlines. CEPD. Retrieved from: http://www.cepd.gov.tw/encontent/m1.aspx?sNo=0019595
Council for Economic Planning and Development. (2013). Removal of items from negative list increase choices for foreign investors. CEPD. Retrieved from: http://www.cepd.gov.tw/encontent/m1.aspx?sNo=0019594
Department of Investment Services. (2013). Invest in Taiwan: Stable Politics, Emphasis on Democracy, Laws, and Freedom. Ministry of Economic Affairs Taiwan. Retrieved from: http://investtaiwan.org/matter/show_eng.jsp?ID=412
functions of financial markets and discusses why a dollar tomorrow cannot be worth less than a dollar the day after tomorrow. Furthermore, the paper explains the cash flows associated with a bond to the investor. And discusses the term "price-earnings (P/E) ratio." In addition, the paper discusses the certainty equivalent approach to estimating the NPA of A project and discusses the problems associated with capital investment process. Lastly, the paper contrasts and compares capital budgeting and strategic planning assesses the agency problems associated with capital budgeting.
Explain the functions of financial markets
The existence of the financial market is just to help and maintain the relations between the users of the capital and the providers of the capital. They also provide an opportunity for both the parties to do transactions with mutual benefits. It is there so that the investor and the investment can do the business smoothly and at…
Bernardo, A., H. Cai, and J. Luo, (2002). Capital Budgeting and Compensation with Asymmetric Information and Moral Hazard. Journal of Financial Economics, 61, 311 -- 344.
Dessein, W., (2002). Authority and Communication in Organizations. Review of Economic Studies, 69, 811 -- 838.
Graham, J., and C. Harvey, (2001). The Theory and Practice of Corporate Finance: Evidence from the Field. Journal of Financial Economics, 60, 187 -- 243.
Harris, M., and A. Raviv, (2002). Allocation of Decision-Making Authority. working paper, Graduate School of Business, University of Chicago.
A regular cash dividend is paid out of the company's cash supply. The dividend can be at a fixed rate, or can be loosely tied to the company's net income. This is the most common form of dividend, and is paid under most circumstances. hereas a regular cash dividend is a recurring dividend, an extra cash dividend is a non-recurring dividend (Investopedia, 2012). This is a one-time dividend that is paid by the company. There is no expectation of a future extra dividend, in contrast to a regular dividend. A special dividend is the same thing as an extra dividend. The only slight difference is that something termed a special dividend is not necessarily going to be paid out of cash. The company may pay with shares or some other asset. Most commonly, however, this type of dividend will be paid out of cash.
A liquidating dividend is fundamentally…
Investopedia. (2012). Extra dividend. Investopedia. Retrieved April 15, 2012 from http://www.investopedia.com/terms/e/extradividend.asp
Investopedia. (2012). Definition of liquidating dividend. Investopedia. Retrieved April 15, 2012 from http://www.investopedia.com/terms/l/liquidatingdividend.asp#axzz1sAcwUjMe
Hadzima, J. (2005). Dilution: A primer on stock vocabulary. MIT. Retrieved April 15, 2012 from http://web.mit.edu/e-club/hadzima/dilution-a-primer-of-stock-vocabulary.html
Goldman, D. (2012). Apple announces dividend and stock buyback. CNN. Retrieved April 15, 2012 from http://money.cnn.com/2012/03/19/technology/apple-dividend/index.htm
An upsurge of The recent increasing interest in commodity investing is has driving en the development of investment instruments that accommodate the needs ofavailable for investors looking for exposure to commodity prices. Historically, direct exposure to the commodity market has been seen as complicated and often too costlyexpensive for the average investor. However, there are now instruments that offer investors a cheap and easy, inexpensive access to directly exposure to commodity price movements.
This section will explore This part will look more into the different instruments available to investors, and discuss commonly held paradigms about their advantages and disadvantages. This discussion is intended e purpose is to providegive the average investor with more complete and detailed better information about of the instruments well available, before they investing in the commodity market. In this paper, Sseven instruments are discussed in this paper, as follows: Futures contracts, stocks, options, exchange…
82 in 2011 to $1.24 in 2012. Moreover, the company has been able to increase its net cash from operating activities from $12.7 million at the end of the 2011 fiscal year 2011 to $25.2 million in 2012.
Moreover, the company has been able to increase the shareholder's value over the years. Typically, the company records ROE growth of 14% and EPS growth of 26% at the end of the fiscal year 2012. The company has been able to increase its total assets within the past 5 years. For example, the company total assets in 2011 were $168 million while the total assets increased to $178 at the end of 2012 fiscal year.
Table 1: KMG Financial Ratios Between 2006 and 2012
Profit Margin, %
Return on Equity,…
Barhart. KMG Chemicals. (KMGB).2012.
Forbes. KMG Chemicals. Forbes Fortune. 2012.
Allebach, M.A. Small Business, Equity Financing, and the Internet: The Evolution of a Solution? Virginal Journal of Law and Technology.4(3). 1999.
eporting and Disclosure: Publicly Traded Companies
Currently, a publicly traded company in the United States must produce a form 10-K each year (Dignam & Lowry, 2006). This is required by the Securities and Exchange Commission (SEC), and provides a comprehensive overview of the company and its financial health. The 10-K is not the same as the yearly report that is produced for shareholders of the company. Depending on the size of the company, it is possible that other forms beyond the 10-K must be filed, as well (Berezin, 2005). While some are uncertain as to whether the current reporting and disclosure requirements are sufficient for companies that are publicly traded, the form 10-K is dozens of pages and encompasses a great deal of information. Company background information is provided, along with financial statements that have been audited, subsidiaries, equity, organizational structure, the compensation paid to executives, and other things (Berezin,…
Berezin, M. (2005). Emotions and the economy, in Smelser, N.J. And R. Swedberg (eds.) The Handbook of Economic Sociology, (2nd ed). NJ: Princeton University Press
Dignam, A. & Lowry, J. (2006) Company Law. New York: Oxford University Press.
Sullivan, A, & Sheffrin, S.M. (2003). Economics: Principles in action. New Jersey: Pearson Prentice Hall.
Hertz LBO Case
How does the dual-track process used by Ford to initiate consideration of strategic alternatives affect the bidding process for Hertz?
The dual-track process has created a rather interesting environment for potential investors. Not only are investors competing with each other, but if the case that a deal is not worked out then Ford has made provisions for the company to be made public through an initial public offering (IPO). Hertz is a well establish company with global operations. Furthermore, it has a stable revenue history that has had an extraordinary amount of consecutive growth. Plus Hertz has built a great deal of brand equity worldwide; especially in regards to the airport services they provide.
All of this makes works to make Hertz an ideal candidate for a leveraged buyout. The interesting aspect to this case is how the dual-track process was structured. Ford must have known…
ental Investment May Seem Safer than it eally Is" offers counsel regarding the pros and cons of venturing into rental property investments (Bernard, 2013). The article explains the appeals of using rental investments to create a new profit stream -- low interest rates, low home prices, potential for supplemental income and the potential for rents to rise in the future. With a turbulent stock market and fickle returns on mutual funds and other investments, many people have come to view owning and operating rental properties as a safer alternative.
However, the piece also warns about the other considerations that many fail to take into account -- tenant issues, unforeseen expenses and competition for the best deals. Many new investors may underestimate the amount of work required to successfully manage and maintain a property. As the article points out, screening tenants, collecting rents, or evicting when a tenant loses a job…
Bernard, T. (2013, March 30). Rental Investment May Seem Safer That It Really Is. New York Times. pp. B1-B5.
Birger, J., Caplin, J., & Feldman, A. (2004). Getting Real About Real Estate Investing. Money, 33(12), 122-128.
Neuman, W. (2005, April 17). Seeking Nest Eggs, Investors Buy Nests.New York Times. pp. 1-5.
The Big Long. (2012). Economist, 405(8813), 77-78.
Financial Analysis of Mcdonald
A financial analysis McDonald's Cor
McDonald Corporation is a global company that conducts business in 117 countries. McDonald operates 32,737 restaurants and 26,338 franchises in the highly competitive fast food industry. Since 1940, McDonald has built a loyal customer base by continuing dedicating to customer service and providing high quality fast food for customers. Presently, McDonald could boast of over 60 millions customers and the company serves average of 64 millions customers daily. In the United States, and other countries where McDonald is operating, fast food business is very competitive. Despite the competition that McDonald is facing, the company has been able to record revenues of more than $16 billions in restaurants and revenues of more than $7 billions in franchise restaurants business. McDonald operates in six geographical locations. The company business operations are in the U.S., Europe, Middle East, Asia-Pacific, Latin America and…
Infinancials (2011). McDonald's Corp. Market valuation multiples. Infinancials.
Mizen, P. (2008). The Credit Crunch of 2007-2008: A Discussion of the Background, Market Reactions, and Policy Responses. Federal Reserve Bank of St. Louis Review. 90(5):531-67.
Putilina, I. (2010). A Financial Analysis of McDonald's Corporation. Economic Research Center.
Stapleton, R.C & Subrahmanyam, M.G.(2009). Interest Rates and Foreign Exchange Risks: An Overview of Hedging Instruments and Strategies. University of Lancarster.UK.
A."Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%?"
PV at 7%
With a discount rate of 7.00% of the bank account and a span of 1 year, the projected cash flows of my money are worth $0.07 today, and this is less than the initial $15,000.00. The resulting PV of the $15,000 is $14,018.69,
However, PV at 4%
With a discount rate of 4.00% of my bank account with a span of 1 year, the projected cash flows are worth $0.08 today, which is less than the initial $15,000.00 money in the bank in one year. The resulting PV of the money in the…
Analysis of “Investor Sentiment, Beta, and the Cost of Equity Capital”
In the study by Antoniou, Doukas and Subrahmanyam (2015), the researchers look at CAPM, beta, noise traders, periods of optimism and periods of pessimism to test a number of hypotheses: first, that optimistic times lure noise traders into buying high beta stocks, which causes high beta stocks to be overpriced;
Noise traders are defined as “young, single males, who lose the most from investing, and are the most susceptible to overconfidence” (Antoniou et al., 2015, p. 352). This definition is not explicitly given but is rather stated in terms of most unsophisticated traders being characterized by these qualities. Considering that about 90% of the market consists of insititutional investors—not retail buyers and certainly not noise investors—the ability of a small percentage of unsophisticated investors to drive price action in high beta stocks for a sustained period of time should…
Part of the overall calculation of uncertainty according to iskMetrics recommendations, however, should include a calculation of correlative uncertainty (Finger 2007). The rationale for including this specific uncertainty in calculations is that it helps to account for inaccuracies and inadequacies in the model, determining the level of risk associated with incorrectly defined or changing correlations used by the model in other calculations and definitions (Finger 2007). An accurate calculation of uncertainty and risk will necessarily include a calculation of the correlative uncertainties attendant upon the model and the situation to which it is applied, providing not a necessarily more accurate view of direct risk, but a useful evaluation of the risk prediction's efficacy.
iskMetrics Calculations: Exposure and Uncertainty
An accurate and well-developed combined understanding of the exposure and uncertainty of a various investment venture or portfolio contributes a nearly complete understanding and assessment of the risks presented by that investment…
Andren, N.; Jankensgard, H. & Oxelheim, L. (2005). "Exposure-Based Cash-Flow-At-Risk under Macroeconomic Uncertainty." Journal of applied corporate finance 17(3), pp. 21-31.
Argentin, P. (2010). "Two-sided counterparty risk." RiskMetrics Group: On the Whiteboard. Accessed 24 September 2010. http://www.riskmetrics.com/on_the_whiteboard/20100615
Finger, C. (2007). "We identify two main versions of correlation risk -- parameter uncertainty and new financial products -- and examine the modeling challenges implied by each." RiskMetrics Group: Research Monthly. Accessed 24 September 2010. http://www.riskmetrics.com/publications/research_monthly/20070400
Greek Crisis- Opportunity
Board of Directors
The Greek financial crisis is rooted in two decades of profligate spending which has ballooned the country's debt to GDP ratio to 124.9% of GDP in 2010 (The Wall Street Journal.com. May 7, 2010). Coupled with a stagnant economy, the risk of a Greek sovereign default is roiling markets and could cause a contagion across the Eurozone and ultimately the global financial system. Yet, Greece has a unique opportunity to emerge from this crisis stronger and able to compete competitively around the globe as a viable and prospering member of the Euro block. To do so they must embrace a mix of austerity and free market reforms to ensure liquidity and avoid default.
Greece had always been a weaker member of the Eurozone as compared with Germany, France, and Italy accounting for only 2.6% of the GDP of the Euro…
Organization for Economic Cooperation and Development.com. (2011). Economic
Survey of Greece. Organization for Economic Cooperation and Development.com. Retrieved December 1, 2011 from http://www.oecd.org/document/28/0,3746,en_2649_34327_48421852_1_1_1_1,00.html
Roscini, D. Schlefer, J. & Dimitriou, K. April 19, 2011). The Greek Crisis: Tragedy or Opportunity? Harvard Business School. Retrieved December 2, 2011
The Wall Street Journal.com. (November 26, 2011). Greece Faces 'Mortal Danger' Amid
This is significant because it shows how some critics of contrarian investing will often point to the various instances of speculation and assume that it is contrarian investing. In some cases the psychology of consumers can become so extreme, that the definition of what is speculative expands greatly. As a result, using contrarian investing in conjunction with other indicators / tools can help prudent investors and traders, be able to identify when the market condition are becoming more extreme.
Contrarian Indicators and Tools
When using the different contrarian indicators / tools in conjunction with one another, you can begin to see how this strategy can be used, to effectively determine if the market conditions are overbought or oversold. There are number of different tools that can be utilized to indentify major changes that are occurring in the trend of a stock or the market averages. These would include: headlines…
"3M Historical Prices," Yahoo Finance, http://finance.yahoo.com/q/hp?s=MMM&a=00&b=2&c=1970&d=04&e=25&f=2010&g=v&z=66&y=0
"3M Reports First Quarter Results," 3M, http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjA2NjEwOHxDaGlsZElEPTMzNDE0MXxUeXBlPTI=&t=1
"3M Reports Fourth Quarter and Full Year 2008 Results," 3M, http://library.corporate-ir.net/library/80/805/80574/items/322063/054431D4-6347-45F1-AF4D-85CCA5F89C52_mmmQ4release.pdf
"American Depository Receipt." Investopedia, http://www.investopedia.com/terms/a/adr.asp
Are there potential risk reduction and diversification opportunities in adding commodities to a Norwegian investor's asset portfolio?
ecent global economic turmoil has inspired investors all over the globe to look for ways to protect their portfolios and to continue to make them grow despite a weak economy. Investments in commodities have been suggested as a solid hedge against future turmoil in the markets. The question is whether this is good advice or not for investors of all types and operating in different home economies. It is difficult to make a suggestion that will work for every investor and in all parts of the world. Therefore, the potential for commodity investing as a hedge against future instability is a question that must be answered for every country in the world on an individual investor basis. This research will explore whether commodity futures can be added to the portfolios of…
Bahattin, A. Haigh, M. And Robe, M. 2010. Commodities and Equities: Ever a "Market of One"? The Journal of Investments, Winter 2010, pp. 76-95.
Batten, J., Ciner, C. And Lucey, B. 2010 . The Macroeconomic Determinants of Volatility in Precious Metals Markets. Resources Policy . 35, pp. 65 -- 71.
Bodie, Z. And Rosansky, V. 1980. Risk and Return in Commodity Futures. Financial Analysts
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Orange Strategic Marketing Plan
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Based on the successful merger of Orange and T-Mobile, the company is one of the world's largest mobile operators and the second leading operator throughout Western Europe. The company has over 30M subscribers worldwide, with 10M on the more profitable and long-term post-paid plans and leads Europe with over 1.5M users subscribing to the GSM 3G speed class of performance (Orange Investor elations, 2012). As of January, 2012 the company and its subsidiaries operate in 25 nations worldwide and has an aggregator market share of 40.4% and one of the highest consistent Average evenue Per User (APU) levels of…
Andlauer, S. & Pouillot, D. 2011, "The Future of Telecoms - Strategies for 2020 (*)," Communications & Strategies,, no. 82, pp. 161-166,179,181.
Bacchiocchi, E., Florio, M. & Gambaro, M. 2011, "Telecom reforms in the EU: Prices and consumers satisfaction," Telecommunications Policy, vol. 35, no. 4, pp. 382-396.
Becerra, E.P. & Korgaonkar, P.K. 2011, "Effects of trust beliefs on consumers online intentions," European Journal of Marketing, vol. 45, no. 6, pp. 936-962.
Benzoni, L., Deffains, B., Nguyen, A.T. & Saleese, O. 2011, "Competitive Dynamics Between MNOs in the Mobile Telecommunications Single Market: Lessons from the U.S. Experience," Communications & Strategies,, no. 82, pp. 127-145,179-180,182.
This also implies inadequacies in fiscal sustainability, which influences investments in private sectors.
The second channel happens through the level, composition and quality involved within the public investment, which shows the level at which the public investment replaces the private investments (Schmidt- Hebbel, Serven, & Solimano, 1996).
The final channel regards the level of taxation on the corporate earnings and the rules applicable in depreciations.
There have been arguments that fiscal policy and public expenditure reduces the private investments in two different manners. These include increasing the interest rates or lowering the private funds involved in financing the investments.
According to the neoclassical theory, the interest rate is also an imperative variable in finding the level of investment. Consequently, it results into a negative effect because it upsurges the interest payable in investments. Concurrently, McKinnon and Shaw, contends that this is likely to cause a positive relationship between the investment…
Shrestha, M.B. (2005), "ARDL Modelling Aproach to Cointegration Test," Proceedings of the 46th Annual Conference of New Zealand Association of Economists, Paper
No. 13, Wellington, July 2005.
Keynes, J.M. (1936). General Theory on Employment, Interest and Money., London,
Any Asset Pricing Theory forms the basic foundation of finance theory, in that it deals with the value of any asset under unknown or uncertain circumstances. The relationship between an asset and its price is the mainstay of the asset pricing theory: the lower the price, the poorer the expected performance. The Arbitrage Pricing Theory derives from this theory. The basic idea in the APT theory is that any sort of risk in asset returns must not affect the pricing of the asset in any way; it must depend on the covariance of assets with the risk factors. (Bayesian Approach of the Arbitrage Pricing Theory) The APT originated from Stephen oss, 1976-1978. oss had used a statistical procedure for assets returns, with the belief that there are in existence no arbitrage probabilities. The APT must of necessity involve a lot of risk taking processes, (Definition of Arbitrage Pricing Theory.)…
An Introduction to Investment Theory" Retrieved at http://viking.som.yale.edu/will/finman540/classnotes/class6.html . Accessed on 29 July, 2004
Bayesian Approach of the Arbitrage Pricing Theory" Retrieved at http://126.96.36.199/search?q=cache:Sa6l536IAccessed on 29 July, 2004
Capital Asset Pricing Model" Retrieved at http://www.investorwords.com/698/Capital_Asset_Pricing_Model.html . Accessed on 29 July, 2004
Definition of Arbitrage Pricing Theory" Retrieved at