A firm’s value depends on the positive net income generated in the past. True False A firm’s value depends on the firm’s ability to generate positive cash flows now and in the future True False When determining the value of a firm, which of the following statements is true? • Inversters are risk neutral. Other things equal they prefer to pay more stocks that are less risky and have uncertain cash flows • Investers love risk. Other things equal they prefer to pay more for stocks that are more risky and have uncertain cash flows.
So price gauging may not be easily defined but it does mean something to those it affects. The Cause of Price Gouging Demand is actually the cause of price gouging, usually when something out of the ordinary occurs. The law of demand states that “if the price of a good increase, holding other
The most obvious differences are that net income is presented on an accrual basis and that net income includes non-cash expense and income items. For instance, if an entity makes and delivers a large sale this will be reflected in net income even if the cash hasn’t been collected yet. Further, net income will include non-cash items such as depreciation expense, amortization expense, and certain allowances and charges. Net
If the IRR is less than the WACC, the project should be rejected, as it impoverishes the firm’s owners. If the IRR equals the WACC, it earns only normal profits (i.e., the owners’ opportunity costs) and accepting it is a matter of indifference. In this care the project’s IRR is 18.031 > 11.88%, therefore the IRR rule tells us the same as the NPV rule: this project will enrich the firm’s owners. We note in passing that in more advanced courses in finance you would learn about projects for which this rule cannot be used. Broadly speaking, they are projects whose cash flows changes sign more than once—e.g., from negative to positive to negative again.
This means that it is reasonable to expect cash is to be received at a later date, though service has already been performed. Expenses in accrual accounting are recognized at the time when the related revenue is recognized this is also known as matching principle. The accrual method makes it possible for cash inflows and outflows to be joined with expected cash inflows and cash outflows, which paints a definitive picture of a company’s current financial condition. Accrual accounting is the preferred method of accounting, as it relates to GAAP. Cash basis accounting is very different from accrual basis accounting, because it recognizes income only when payment is received and expenses when they are made.
Lastly organizations must all seek the greatest profits meaning nothing else but profits. When these conditions are meet which isn’t often, organizations can supply goods following their own self-interests in a predictable manner to the market. Suppliers utilize the demand curve to determine the amount of productivity and the right cost for the market. The requirement that all the firms are large ensures no organizations will be able to gain more than another. These types of conditions keep firms from monopolizing the market.
c). The transfer price of an intermediate product that has an imperfectly competitive external market for the for the product exists when the transfer price of the intermediate product is given at the point at which the net marginal revenue of the marketing division of the firm is equal to the marginal cost of the production division at the best total level of output of the intermediate product, and the price charged in the external market is given on the external demand curve. DQ13) The advantages of cost plus pricing is that it leads to approximately the profit-maximizing price because firms usually apply higher markups for products facing less elastic demand than for products with more elastic demand. p This involves calculating the average variable cost of producing the normal or standard level of output , adding an average overhead charge so as to get the fully allocated average cost for the product. The disadvantages for cost-plus pricing is that it may be very difficult to
However using the curve we have to set a fair price to get rid of a lot of accounts at time and sell them in bulk. Setting a fair price helps the flow of the debt to come in out and keeps the demand and supply at an equal level. Microeconomics creates models that are effective when looking at the markets supply and demand for certain products it relies a high degree of competition which means there are enough buyers and sellers for bidding to take place which raises and lowers prices. The equilibrium is the point of which all bidding has been done and no one at this point will go higher or lower. With this said in the simulation the elasticity is the quantity how many apartments were vacant and how the demand of these apartments were not being met because of the price.
A more difficult and time consuming effort Huffman could take to reduce exchange rate risk is to spin the rate to your advantage (Prinzel, 2013). This means when USD exchange rates are high, Huffman would need to ensure their customers are aware of the benefits they could be receiving in discounts. Relative to Huffman Trucking’s benefit with this approach, they could buy foreign exchanges when rates are low, similarly taking advantage of the same benefits their customers would
Should the government influence the economy or stay away from it? Should economic policy be focused on long term results or short term problems? This and other such beliefs form the difference between the two major schools of thought in economics: Classical and Keynesian economics. For one thing, Keynes refuted Classical economics' claim that the Say's law holds. The strong form of the Say's law stated that the "costs of output are always covered in the aggregate by the sale-proceeds resulting from demand".