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Financial Decision Making - Coursework Example
Finance & Accounting
Pages 3 (753 words)
When looking to invest in a company the process of deciding which company provides the best return on investment can be very time consuming and complex. In general most investors are looking to minimize investment risks while realizing the maximum return possible…
The price earnings ratio measures the relationship between stock dividend payout and a stock’s market price in order to compare a stock’s performance against any other stock. One can also use earnings per share in order to determine how a company compares to another in terms of current dividend paid. This two key investment ratios can only be used with company’s that are publicly traded and issue stocks Additionally there is a wealth of investment advice and current company profiles and analysis available on the internet, which make the task of choosing an investment much easier for the private investor. For a company that is not publicly traded, an individual must use other forms of financial analysis in order to determine what the best investment option is and how much the required rate of return needs to be in order to justify the risks associated with a specific company. We have been presented with three individual companies as possible investment alternatives none of the companies are publicly traded. The three possible investment choices are: 1) Acme Consulting-Although the initial investment of the company is low at $50,000,the company will be a start up venture so the risks related to the investment are always highest with a new company. ...
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