Financial Finance Case Study

1- What is the price elasticity of demand? How is the price elasticity of demand calculated

The price elasticity of demand is a term that is usually use in economic to discuss the price sensitivity. It refers to the relationship between a change in the price of a particular good and a change in its quantity demanded, in other words, the price elasticity of demand is the measure of variable reaction to change in another variable. The supply or the demand of a good or service changes with the price or the consumer’s income.

The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in the price. If the result is greater than one, means the good or the service is elastic. If the result is less than one, means the good or the service is inelastic. For example, gasoline usually has low elasticity because

The three principal methods of financing that corporates use are: stocks, bonds, and reinvestment. Corporation can generate money by selling some of its ownership to investor in the form of shares. In this case, the corporation will not pay any interest for the money it receives from the investors, but the future benefit of the corporation will be divided among shareholders according to their contributions. This type of financing is a little bit risky for the investors, because in case of bankruptcy, they will lose their money and they cannot be reimburse.

Firms can also finance their activities by using bonds. It is a loan that the firm can get from banks. For this type of financing, the company has to pay the money back to the banks with interests at a specific date no matter if the company prospers or not.

Reinvestment is the last financing method use by corporations. Reinvestment is when a company use some of its benefit to buy good that will be used in the future to produce more profits for the