Financial Portfoli analysis & technical analysis ( risk ) Essay

Financial Portfoli analysis & technical analysis ( risk ) - Essay Example However procuring more capital through bond issue is likely to enhance the risk position of the business (Carter & Van Auken, 1990). The returns earned by the firm on the share prices are seen to be highly fluctuating. Returns on equity are also seen to be lower than the returns on bond. This indicates that the company pays off a large amount of its year end profits as interests to bondholders. As a result of the earnings available to shareholders becomes less. It also implies that the company does not earn adequate levels of earnings to cover both interests and tax related expenses. Considering the returns which the form provides to both the shareholders and the investors of bond, majority investors would prefer to invest in the bonds of the company (Reilly & Brown, 2011). Standard deviation essentially measures the deviation from the mean value. In case of the standard deviation values for the equity and bond, it is preferred that the results remain high. When the standard deviation values are high, it would indicate that the returns provided to the shareholders and bondholders are high. From the tabulated results it can be seen that the standard deviation value of returns provided to share holders are lower than the returns provided to the bondholders, indicating that investing in bonds is likely to be more profitable. Variance analysis is essentially the analysis of mean values. The higher the variance, it is predicted that the average value of the data set is high. In case of the variance calculated for the Emirates National Bank PJS stock and bond, it is seen that variance costs in respect of bond are higher than stock. Both covariance and correlation co efficient are adequately low for the company. This is due to the vast difference in the mean values of both the data set procured for stock and bond returns. From the overall analysis it is understood that investing the company’s bond would be more profitable

Company profit calculation Assignment Example | Topics and Well Written Essays - 1250 words

Company profit calculation - Assignment Example Q = (accepted), (rejected) At Q = , ATC’’ becomes 9.61 while at Q = , ATC’’ becomes 0.381. Since Q > 0 and since ATC’’ > 0 at Q = , so it can be surmised that Q = when ATC is minimised. Part (g) Firms will neither exit nor enter in the longer run in an industry because already operating firms are creating normal profit. Since there are no incentives to either leave or enter the market in the longer run, so there will be no entry or exit in the longer run. Part (h) Question Two As market demand levels vary, the firm’s profits in any industry will tend to vary. As long as some form of economic profit is available, new firms will enter the market. Similarly, any kinds of economic loss will force firms to leave the market. When economic profit is available, the supply curve tends to shift to the right in order to reduce price. As price falls, so does economic profit and thus the incentive to enter the market. Conversely, if economic loss o ccurs, the supply curve shifts to the left in order to increase price. Bigger price tags tend to reduce the economic loss being faced. Market adjustments continue to occur until firms come to a point where the marginal revenue equals the marginal cost which in turn equals the price. Also, the short run average cost and the long term average cost meet the equilibrium levels to produce total market equilibrium in the longer run. Question Three A shock in demand leads to a sudden rise in demand. This in turn disrupts the market equilibrium and the supply curve tends to shift to the right while the demand curve tends to shift to the right as well. In addition, it is typical to find that the price for any product experiencing demand shock tends to increase as well. Larger quantities required are dealt with by firms operating under perfect competition. For constant cost industries, when the industry expands in reaction to demand shocks, there are no changes in the production costs or in t he prices of resources. The basic contention of the constant cost industry is that as new firms enter the market, the long run average cost curve does not get affected. Hence, as the efficiency of production does not change due to demand shocks, the supply curve in the longer run becomes horizontal. Question Four Certain industries require long term economic profits in order to survive in the market. These industries may require continuous new inputs in the form of research and development (R&D). The pharmaceutical industry for example requires that research be carried out into new medicine. This may become necessary for example as one generation of antibiotics are unable to deal with the next generation of germs. The R&D process in turn requires the investment of economic profit which in turn can be labelled as a cost. The reinvested economic profit from the operation of such industries can be seen as a cost although it is not necessary that the amount of such an investment would e quate to the economic profit generated. For example, the pharmaceutical industry invests in the development of a medicine that it will continue to produce constantly for decades which indicates that the economic prof