If the company is developing well with these inv... ... middle of paper ... ... earn their profit. Therefore, if a company is not performing up to the investors’ expectations, it can put a lot of pressure on them. Conclusion In conclusion, the stock market is a conservative approach for companies to seek funds for further expansion and development. The stock market plays an important role in developing the economy as it helps the economy to develop and grow when investors invest their money in to the stock. With investments pouring into the economy, companies are able to make bigger profits to reward their shareholders with dividends.
This does not necessarily depend on externalities but by increasing the liquidity of firm investment, reducing productivity risk, and improving firm efficiency, stock markets encourage firm investment. This stimulates human capital production and growth. Holmstrom and Tirole (1993) emphasize that a firm's ownership structure influences the value of market monitoring through its effect on market liquidity. Considering an agent holds some fraction of the firm as a long-term investment. If he decides to decrease his ownership, there will be more shares actively traded and the liquidity of the market will go up.
Globilization and the World Economy Globalisation in general means the effort of a company moving into other territories (outside the national boarders of a country) to sell its goods and services to increase profits as a result of expansion. Globalisation incorporates both opportunities and risks which change the way businesses are managed worldwide. It brings about a well-diversified portfolio for such a company. This is because the company is guarding itself from huge losses in case of economic uncertainty. Significant gain in one company can cover for the losses made in another company.
One major advantage associated with trading globally comes from an increase in profits. Typically, the reasons behind purchasing raw materials from a foreign country involve the fact that the materials are cheaper to buy and ship. In turn, this reduces overall expenses and as a result, companies can sell products for less. Supply and demand dictate that when products sell for less than the product of the competition and are of equal quality, the volume sold will rise. Increase in sales, along with the decrease in price of production will ultimately increase profits.
Consumer satisfaction is important because it provides marketers and business owners with a metric that they can use to manage and improve their businesses. Hence increase in prices damages the already established consumer satisfaction. Harris, L. and Gurel, E., (1986) If the business would go for the argument of reducing prices of its products, the good effects will include; Increased sales volume. The law of demand and supply states that demand increase as prices decrease. The business will witness higher sales volume as the reduced prices will attract more customers to its products.
Nguyet Nguyen BBUS 503 Exam 1 Goodwill and impairment test As a result of increased number of merger and acquisition (M&A) over the years, there is nothing that companies feel pains more than controversial goodwill accounting. Goodwill is a special asset that only exists when an acquisition takes place. So why would firms choose to make deals over M&A and create headache? Usually, companies have options to grow internally through making better operation or diverse investment projects, but more often companies choose to expand externally to create synergy value. Companies agrees to pay more than a company’s perceived fair market value by little premium or even high premium to obtain control over the net assets, it is betting on the potential growth of the purchased companies.
INTRODUCTION Dividend payouts are on of the most comprehensively researched areas in Finance . Dividends are used in signalling the future prospects. It’s the manager duty to increase the shareholder wealth , but with separation of management and ownership many conflict of interest arise leading to the Agency Problem. Maximizing the dividend in a in-perfect market , a sentiment is shared that is laced with positive outlook. The signal is for bright future prospects , and dividends are paid even if there exists opportunities for profitable investment opportunities which drives up the value of the share value ,Bonus-issuing firms yielded greater returns to their shareholders than those that did not make any bonus issue but maintained a steadily increasing dividend rate.
The second argument claims that little to no dividend payout is more favorable for investors. Supporters of this policy point out that taxation on a dividend is higher than on capital gain. The argument against dividends is based on the belief that a firm who reinvests funds (rather than pays it out as a dividend) will increase the value of the firm as a whole and consequently increase the market value of the stock. According to the proponents of the no-dividend policy, a company's alternatives to paying out excess cash as dividends are the following: undertaking more projects, repurchasing the company's own shares, acquiring new companies and profitable assets, and reinvesting in financial assets. Arguments For Dividends In opposition to these two arguments is the idea that a high dividend payout is more important for investors because dividends provide certainty about the company's financial well being; dividends are also attractive for investors looking to secure current income.
• A lower dividend yield is considered better as it reflects a higer capital growth for the company. • However, make sure that the low yield is not because of a steep drop in the price of the share. 4. Dividend payout ratio • This ratio is calculated by dividing the dividend per share by the earnings per share. • Generally this ratio is around the 60% ... ... middle of paper ... ...he past, it is more likely to face similar situations better in future and you can invest in its stocks. • Moat A moat is the economic advantage a company has over others in the market.
Stock split reduces the market price of a stock without any cha... ... middle of paper ... ... to smaller investors who could not afford it. This reason is psychological in the sense that, as the price of a stock gets higher and higher, average investors will consider the price of the stock to be too high or unaffordable. Splitting the stock will therefore entice new investors who will perceive the stock to be at an attractive price level, even though the value of the stock doesn’t change. Existing shareholders may also have the feeling that they now have more shares than they did before, and if the price of the stock increases in the future, they now have more stock to trade. Another is that, the liquidity of the stock increases.