Financial management Assignment Example | Topics and Well Written Essays - 3000 words

Financial management - Assignment Example In a perfect market, it is assumed that no taxes are imposed and interest rates are derived by the market demand and supply function (Layton, Robinson & Tucker 2012, p. 895). If we consider a perfect competition in the market, an investor would be indifferent of the capital structures followed by each firm. The M&M theory suggests that in a tax-free economy, capital structure becomes irrelevant to the value of the firm. Some assumptions that the theory makes include: Investors are concerned about the returns or future cash inflows. Hence, they expect the same whether the investment is made in bonds or equity. As a result, investors would make decisions based on the firm’s value. Debt and equity components are traded in perfect markets, such that the transaction costs, taxes and bankruptcy costs are nil. Competitors, in a perfect competition market cannot set their own price for similar product offerings. Moreover, investors do not bear the burden of transaction costs leading to their indifference to moving funds from one company to the other. Keeping an eye on the above discussion, it can be concluded that investors would go for an geared company if they are interested in the investment returns. In the case provided, Aguia seems to be a more lucrative opportunity for the investors. Aguia, being a geared company will have lower cost of capital and have higher expected returns in future. Since, it was assumed and provided above that investors are only concerned about the future cash flows, a rational investor would prefer a geared firm i.e. Aguia over the un-geared firm i.e. Pomba, in our case. In addition, a rational investor can make decision on future prospects and plans of the management. Let’s assume that Pomba plans to switch toward debt financing, it might be a more attractive option compared to Aguia as it has higher profit margins comparatively. Hence, financing arrangements in a

Introduction to management enquiry Essay Example | Topics and Well Written Essays - 1000 words

Introduction to management enquiry - Essay Example Although there are no large-scale changes taking place practically. Just three universities are going to charge less than maximum. Many standard universities still feel that teaching undergraduates is not profitable. The other reason universities hesitate to accept that all institutions and degrees are of equal standard, they fear that their credibility may get damaged. Thus one can feel relieved that just few institutions are going to adopt the new system. Bradford University is planning to give scholarship to computer science students, and the number of students would be reduced on the basis of grades. Poorly performing students would have to choose less important courses. The standard universities are still stuck up in managing the cost of teaching undergraduates. Yet the most acceptable way is to use research money and get finances from over seas students. The result is universities are planning to accommodate more foreigners by reducing the number of home students. This implementation of new system would be difficult because of low cap on fees. Expansion of popular courses would also be an option when extra students are taught at lower expenses. Universities should recruit right number of students because drastic increase or decrease would be unprofitable for them. If the university increases the number then it would lose government funding and also it would be fined. Let us see how it goes. The government 's target of bringing 50% of youngsters to universities by 2010 will not be achieved too. The government must have to ignore those universities that are expanding popular courses if the planned number is to be achieved. The implementation of this new system may bring some ridiculous situation to the over all scenario of the whole education system. It may look like chain of super store offering various incentives for their clearance sale or for increasing the revenues. It seems that all these binding conditions will not be successful, it will make universities like half-markets and it would be very difficult to manage. Critique The article paints a very bleak picture of the whole scenario. Although it contains some valid points but still there are some positive aspects of the Education bill 2004. The authority gained by universities for fixing tuition fees up to 3000 would give a much-needed fiscal width to universities. It is true that government funding has dropped but the gap created by this reduction could be fulfilled by the increase in the fee. It is also correct that the gap was financed from research and maintenance funds, but it had slowed down much needed research work. That retarded research will also get a boost from the income gained by the universities by increasing the tuition fee. The writer admits this fact that the students are real beneficiaries and they should pay more, so the academics may also get reasonable ruminations. The fear of rise elitism indicated by writer can be ignored keeping in view other benefits of this new system. Baroness Diana Warwick, chief executive of Universities UK said that the passage of this bill was essential, in her view, for the future health and strength of universities. She