In a few sentences, answer the following question as completely as you can. Define the three forms of market efficiency. Why should a financial decision maker, such as a corporate treasurer or CFO, be concerned with market efficiency?
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In a few sentences, answer the following question as completely as you can.
- Define the three forms of market efficiency. Why should a financial decision maker, such as a corporate treasurer or CFO, be concerned with market efficiency?
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Solved in 2 steps
- Consider the dilemma you might someday face if you are the CFO of a company that is struggling to satisfy investors, creditors, stockholders, and internal company managers. All of these financial statement users are clamoring for higher profits and more net assets (also known as equity). If at some point, you suddenly found yourself not meeting the internal and external earnings and equity targets that these parties expect, you would probably search for some way to make the financial statements look better. What if your boss, the CEO, suggested that maybe you should make just one simple journal entry to record all the goods that your company is holding on consignment, as if that significant amount of goods were owned by your company? She might say that this action on your part would fix a lot of problems at once, since adding the consigned goods to merchandise inventory would simultaneously increase net assets on the balance sheet and increase net income on the income statement (since it would decrease cost of goods sold). How would you respond to this request? Write a memo, detailing your willingness or not to embrace this suggestion, giving reasons behind your decision. Remember to exercise diplomacy, even if you must dissent from the opinion of a supervisor. Note that the challenge of the assignment is to keep your integrity intact while also keeping your job, if possible.Briefly explain the practice of enterprise risk management and the role that can be played by managerial accountants in enterprise risk management.Why should a financial decision maker such as a corporate treasurer or CFO be concerned with market efficiency?
- Tutorial Questions Explain to John, your mentor, the primary goal of the organization? Your manager is requesting you to provide an explanation to the question. Would the role of a financial manager be likely to increase or decrease in importance if the rate of inflation increased? What is the difference between stock price maximization and profit maximization? What are the three principal forms of business organization? What are the advantages and disadvantages of each? What mechanisms exist to influence managers to act in shareholders’ best interests? What is an agency relationship? What agency relationships exist within a corporation? What are financial intermediaries, and what economic functions do they perform? How does an efficient capital market help to reduce the prices of goods and services? What is the term structure of interest rates? What is a yield curve? How should users and savers of…Explain the important implications which investors and corporate managers wishing to use the financial markets can derive from efficient markets theoryCorporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better understand the factors that drive a company’s financial performance, as reflected by its return on equity (ROE). By using the DuPont equation, which disaggregates the ROE into three components, analysts can see why a company’s ROE may have changed for better or worse and identify particular company strengths and weaknesses. The DuPont Equation A) A DuPont analysis is conducted using the DuPont equation, which helps to identify and analyze three important factors that drive a company’s ROE. According to the equation, which of the following factors directly affect a company’s ROE? Check all that apply. Equity multiplier Share price Profit margin Most investors and analysts in the financial community pay particular attention to a company’s ROE. The ROE can be calculated simply by dividing a firm’s net income by the firm’s shareholder’s equity, and…
- A crucial role of financial managers is in making financial decisions and exercising control over finances in the organization. They make use of techniques like ratio analysis, financial forecasting, profit, and loss analysis, among others. Imaging you are the CFO of a multinational corporation and part of your daily tasks are the making of financial decisions, and one specific of those decisions will boost this quarter earnings but will impact stock market value. What should you do? Implement your decision or modify it to halter the potential impact of stock value?The CEO and his top managers have asked themselves two important questions: a. do customers value what the company is providing; and b. can the company make money doing that? This group is developing a ________. A. business model B. BCG matrix C. competitive advantage D. strategyBriefly explain what competitive rivalry is? Explain what competitive behavior is and the three factors that drive competitive behavior With the aid of a diagram explain the model of competitive rivalry and how a strategist can use that understanding to develop strategies that facilitate the attainment of higher financial performance?
- Please see below. Do you agree with this opinion? Why or why not? Please include an explanation. All of the financial ratios are important to determine a company's stability and to gage how well the company is doing or not. With that being said, if I were a financial user and wanted to know if I should invest in a company or not the profitability ratio would be the most important to me. There are many different profitability ratios such as earnings per share, price earnings, gross profit rate, asset turnover etc. Each of these can be used to determine a company's income or lack of income and can be used to gage its ability to obtain its debt, which can help a financial user make the choice of whether to invest or not.How can a Finance, as a function within the company, influence the process of business strategy development and execution?Which of the following best describes the potential impact of business risk on Earnings Quality? Select one: a. Business risk is mostly composed of financial risk factors and it has minimal effect on earnings quality. b. Higher earnings quality is linked with companies more insulated from business risk. While business risk is not primarily a result of management’s discretionary actions, this risk can be lowered by skillful management strategies.' c. A higher level of earnings quality can be observed in the industries with high business risk, because higher risk means higher returns d. For managing business risk, the managers almost have no discretion, therefore business risk is not directly or indirectly related to earnings quality.
