Business finance-2 - Essay Example

Only on StudentShare

Extract of sample
Business finance-2

In order to spread risks, most investors diversify by investing in more than one type of security or portfolio. It should be noted that investors like returns but at the same time dislikes risk and uncertainties (Sharpe, 2007). Though financial market has significant rewards and benefits, it is very complex and very volatile, thus critical analysis is required in risk evaluation so that the expected returns can be validated. Dating back in 1950s an American economist managed to establish the theory of portfolio choice (Markowitz, 1959). This was a tool used by investors during this period to analyze and predict risk in relations to the expected earnings or returns. Markowitz’s theory is the currently renowned Modern Portfolio Theory (MPT). Basically, it is an investment theory that was designed to help in maximizing portfolio returns. This is done relative to the level of portfolio risks meaning that a minimum risk levels correspondents to an equivalent expected return level. Though this theory has been widely applied within the financial sector, a lot of challenges have been pointed on its basic assumptions. However, being an improvement of the traditional investment framework, it provides an advance system for the application of the mathematical model, especially, in finance. ...Show more

Summary

Business Finance [Pick the date] 2010-11s 1. Portfolio Theory and Its Implication to Investors in the Market Portfolio Theory Portfolio theory is tools investor used before committing themselves into long term or a short term investments in securities and equities…
Author : hauckantonetta
Business finance-2 essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Business finance-2"
with a personal 20% discount.
Grab the best paper

Related Essays

International business finance
This has made its clients develop a strong customer confidence on the firm solely because of its timely delivery of products (Madura 1999). The companies of such calibers are also not so much meaning that the market for office supplies is still green even in the foreign markets.
10 pages (2500 words) Essay
International business finance
This decision has implications upon the company’s capital structure, its cash flows, and prospects for future financing. Most especially, it impacts upon the investors’ perception of the company. If dividends are too seldom declared or the amount is less than expected, then by dividend cash flow theory the present value will justify a lower stock price.
8 pages (2000 words) Essay
Finance and Business Essay
It is also assumed that there is no travel agent involved in the case of Travel International; hence, no commission costs as well. Moreover, the income statements have been designed with respect to a single average flight. 1. Income Statement (per flight) Average number of passengers per flight Average total revenue (175*325) Variable Costs Fuel costs Food and Beverage service costs (4*175) Commission to travel agents (10% of 56,875) Gross Profit Fixed Costs Fixed annual lease costs Fixed ground services costs Fixed flight crew salaries Operating Loss 175 56,875 (14,000) (700) (5687.5) 36,487.5 (53,000) (7,500) (7,000) (31,012.5) 2.
3 pages (750 words) Essay
Business Finance
In their arguments, the critics have it that firm managers are mostly interested in other factors rather than attaining profits for the firm. Managers have been observed to have their interests in prestige, power, employee welfare, leisure, the larger society welfare and community well being.
12 pages (3000 words) Essay
Multinational Business Finance
Allow me to familiarise you with the basic finance policies and strategies that guide our company in managing these risks so we can bring down our costs of equity, debt, and capital. Actively managing financial risks allows us to continue doing what we do best - designing and selling great products - instead of just reacting to problems linked to events beyond our control.
8 pages (2000 words) Essay
Business Finance Essay
The payback period is computed as the follows: Other things being equal, the investment with a low payback period is chosen as it implies less risk for the company. As the investment is recouped in a shorter period of time, it also indicates that the investment is less likely to fail.
6 pages (1500 words) Essay
Corporate Finance 2
Another school of thought believes that dividends are adverse for the average shareholder as they attract taxes and cause fiscal disadvantages. Last but not the least the third group lauds large dividends as positive signal to shareholders that all is well.
23 pages (5750 words) Essay
Corporate finance 2
that dividends have nothing to do with firm value because there is no tax disadvantage to an investor to receiving dividends, and that firms can raise funds in capital markets for new investments without having to go through high issuance costs. Another school of thought
23 pages (5750 words) Essay
Finance 2
Obviously, the changes or fluctuations in above factors might affect the expected earnings of a company. Firms are therefore involved in future hedging which means they make
4 pages (1000 words) Essay
International business finance
The paper utilizes financial data and computes the WACC, as well as the Net Present Value. The analysis gives a WACC of 10% and an NPV of € 1.359 million, which is indicative of the value of the investment into a joint
10 pages (2500 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT