Investors are irrational or naive
Explain how companies with substandard financial history can draw the attention of investors. Are investors irrational or naive?
Expert
There may be some companies in the world whose performance in the past may not be good due to poor management, poor market condition, increased competition, introduction of substitutes in the market. All these can lead to decrease in revenue and ultimately profits. Now there may be companies whose financial performance has decreased not due to some mismanagement but due to some hard hitting abnormal conditions such as poor market etc. Investors look out for distressed investments so that they can purchase the stake at low valuations. Investors know which company has good prospects and they can exit such investments at a high valuation at a later stage. They are very smart individuals.Investors are neither irrational nor naive. They took any investment decisions based on many factors such as future growth of the sector, the competition in the market, how to maximize returns etc. They take decisions after they know that they will get their required Rate of return from the investment. Further, investors are also not naive. It is their hard earned money. They make investments only after they are reasonably sure of a good and profitable exit. They apply various techniques of valuation to evaluate a company before investing in it. They do not invest in a company just by their whim They also have mandate which they have to fulfill.
Provide a brief overview of Capital Market Efficiency?
Our purpose this week: learning how to understand and interpret financial statements. Assignment: The class should discuss all of the questions listed below as they rel
How can we compute a company's cost of capital in emerging nations, particularly when there is no state bond that we could take as a reference?
The financial ratios of a firm are as follows. Current ratio = 1.33 Acid-test ratio = 0.80 Current liabilities = 40,000 Inventory turnover ratio = 6 What is the sales of the firm?
XYZ Company is planning to acquire a machine which will cost $200,000, that will last for 4 years. The company employs straight-line depreciation. The tax rate of XYZ is 35% and the proper discount rate in this situation is 12%. (A
Explain the definition of put–call parity described by Reinach.
What is optimal capital structure?
Does the equity of shareholders represents the savings a company has accumulated by the years?
Which parameter good measures value creation; the Economic Value Added (EVA), the CVA (Cash Value Added) or the economic profit?
What are Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)?
18,76,764
1941993 Asked
3,689
Active Tutors
1434558
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!