and personal lives are affected by the use of accounting. Accounting ideas affects us as well when we have to take certain decisions how to spend our money. Planning is an important role when we take the decisions about how much money we are going to save and how much money we are going to spend. You can either write your planning which is known as budget or we can just memorize it in your mind. Organisations have a large amount of accounting so they cannot keep everything in their minds therefore
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carry on business, a firm invests in tangible assets like plant and machinery, buildings, and intangible assets like goodwill and patents. This comprises the investment decision. These assets don’t come free; one has to pay for them, so a company needs to tap various sources of funds including promoter’s contribution. This forms the financing decision. The investment in assets generates revenues and cash flows for a specific period of time. The managers of the company can either retain cash with
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in stock returns. When picking a fund an investor faces a bewildering yet important choice from amongst several hundred product offerings and there is a considerable degree of price dispersion. Studies of Malaysia funds have relied on the assumption that conditions determining market efficiency, or the ability of fund managers to exploit inefficiencies, do not change significantly during the period examined. According to this research paper (2002-6), the unit trust industry in Malaysia can be
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investors’ expectations and determine their level of confidence or fear. Behaviorists believe that at times, the real determinants of stock market movements are the forces of human and cultural psychology, oranimal spirits (a term coined by economist John Maynar 2. How does Behavioral Finance contrast with Efficient Market Theory? Behavioral finance takes issue with two crucial implications of the EMH: (1) that the majority of investors make rational decisions based on available information; and
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vs CAPM Prediction The most common approach is two compare historical average returns to the CAPM’s prediction. We compute the CAPM’s estimated prediction by estimating beta (β), the market premium (E (rM ) − rf ), and the risk free rate (rf ). We want the estimated prediction error (called α): ˆ αi = ¯i − CAPM Prediction ˆ r ˆ r = ¯i − ¯f − βim (¯M − ¯f ) r r r The CAPM and α ˆ α will not always be zero even if the CAPM is true. Why? ˆ What can we say about prediction error if the CAPM holds
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March 17, 2014 ABSTRACT Week 4 brought on the discussions of analyzing financial statements. We looked at how to use the indirect and direct methods when putting together a statement of cash flows. It was also discussed how one would use ratios and vertical and horizontal analysis in regards to deciphering financial statements. Lastly, we talked about preferred and common stocks are issued, placed as journal entries on financial statements and the paid out in dividends. With these topics
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abolished. | | b. | The threat of takeovers reduces conflict of interest problems, but only between bondholders and stockholders. | | c. | Compensating managers with stock options can do nothing to help eliminate potential conflicts between stockholders and managers. | | d. | Compensating managers with stock options can help reduce conflicts of interest between stockholders and managers, but if the options are
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Chapter 6 Q.7 Use the rate-of-return data for the stock and bond funds presented in Spreadsheet 6.1, but now assume the probability of each scenario is as follows: severe recession: 0.10; mild recession: 0.20; normal growth:0.35; boom: 0.35. (a) Would you expect the mean return and variance of the stock fund to be more than, less than, or equal to the values computed in Spreadsheet 6.2? Why? The variance is expected to increase because the probabilities of the extreme outcomes are now higher
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management can also contribute to the success or failure of a business. When inventory is mismanaged, some of the following can occur: The amount of items in stock will be more than the number of items that you sell; There will be delays in your delivery system; Your production will be interrupted; An increase in your inventory management costs; and Incorrect inventory totals (Rinatha, 2006). When inventory is managed correctly, the following activities will be possible to complete
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CHAPTER ONE 1. BACKGROUND OF THE STUDY Before an investor commits his funds to any investment in stocks, he must ensure that such stock is the type that is capable of satisfying his investment objectives. These objectives which vary from one investor to another include:- i) security (safety of capital invested) ii) adequate return on investment by way of dividends iii) growth prospects/capital appreciation iv) spread of risks, etc.
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