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.
Which currency has to be utilized in an international acquisition in order to compute the flows?
Is the difference for the value creation in a company among the market value of the shares (capitalization) and their book value a good measure since its foundation?
Efficiency Ratios: These ratios comprise Receivables Turnover, Inventory Turnover, Asset Turnover and Net Working Capital Turnover ratios. Efficiency ratios show the utilization of Assets of the company thus as to generate Revenue that is, the best ut
For an enhanced understanding of banking industry, it is significant to look at the atmosphere in which commercial banks operate. Production growth and globalization are two main forces reshaping the banking industry nowadays. The following two questions are associate
I suppose that a valuation consciously realized in my name tells me how much I have to offer for the company, am I right?
What are Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)?
AB Corporation has 3 million shares of common stock selling at $19 each. It also contains $25 million in bonds with coupon rate of 8%, selling at par. AB requires $10 million in new capital that it can raise by selling stock at $18, or bonds at 9% interest. The expect
I think Free Cash Flow (FCF) can be acquired from the Equity Cash Flow (CFac) using the relation as: FCF = CFac + Interests – ΔD. Is it true?
Working capital requirement: Is a financial term known as WCR, which is used to judge the operational liquidity of the business and it is a part of operational capital. A firm in spite of having a good profitability and assets may not have a good liqu
Does the usual value of the sales and of the net income of Spanish companies have anything to do along with sustainable growth?
18,76,764
1960120 Asked
3,689
Active Tutors
1425684
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!