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There si no simple answer to this question. A general theme is that companies have the tendency to increase in size over time in an industry unless new entrants appear which challenge them. This would ultimately lead to higher profits over time. But if profit becomes too high compared to the type of business new entrants should enter the market (under ideal competition) to take away market share and therefore profit.
The higher the entrance barrier (the costs to enter a market) the higher normally the size of a firm and the potential profits. Examples are aircraft industry, car industry but also beer and hundred of other market structure examples.
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The size and the importance of the finance function in a business firm depends primarily on what?
size of the firm
What is a profitability index?
Profitability index is the "rolling forward" of indices of profitability. For example, a company has a turnover of
What are the channels through which financing choices can affect firm value?
dont knw.
What are the measures of profitability?
Profitability is an important factor when running a business. Businesses calculate profitability in many ways, but figuring out profits after expenses is their goal. Profitable ratios is a measure of profitability that can be used to assess a business's ability to generate earnings.
How does capital budgeting affect shareholders wealth?
since it is a long run investment, the ability of the firm to involve in effective planning affect the wealth of the shareholders
What is Substantiality?
Substantiality refers to the size of the segment in terms of profitability for the firm
Explain how the general environment and the industry environment are highly related how can such relationship affect the profitability of a firm or industry?
explain how the general environment and industry environment are highly related. How can such interrelationships affect the profitability of a firm or industry?
Is profitability of a firm an adequate measure of its efficiency?
to what extent does profitability of a firm measure its efficiency
Can safety and health affect a firm's profitability?
Yes, it can be a major factor in the profitability- and in some cases, the financial survival of the company. There are several firms that have been bankrupted by fines, lawsuits, and increased insurance costs due to a poor safety program.
Can the firm's financing decisions affect its profitability?
Yes, a firm's financing decisions can play a major role in determining its profitability. A firm can opt for different methods of financing, i.e. raising money for business needs. For example, finance may be required to invest in a building or machinery or materials. Finance may also be needed for ongoing business expenses like salaries or rent or telecom costs. There are different ways to arrange for these funds for the firm, and funds cost money. If the firm borrows the funds from a bank, then it incurs an expenditure which is the interest charged by the bank. This expense is reduced from profit, so profitability reduces. Another way of raising funds is to sell shares, i.e. the equity of the company. The owners of the shares then become part owners of the company, and can also exercise management control over the company. In this way, distribution of equity can also affect profitability.
What does Asset Management ratios indicate?
Asset management ratios indicate a) how well a firm is using its assets to support sales b) how efficiently a firm is allocating its liabilities c) the return on assets d) the profitability of the firm
The size and the importance of the finance function in a business firm depends primarily on what?
size of the firm
What two ratios measure factors that affect profitability?
what tw ratios measure factors
The income statement is the major device for measuring the profitability of a firm over a period of time?
The income statement is in fact the major device used for measuring the profitability of a firm over time. Unlike the balance sheet that just shows the firms net worth an income statement shows both the revenue and expenses over a time period.
Why is it important to monitor the macro-environment of a firm?
It is very important to monitor the macro-environment of a firm as they will directly affect the organization. These are external factors that a firm will not have control over and will affect the performance of the business.
What were some promises Lesseps made about the benefits of the canal?
usefulness, great profitability, and a large size
What are some promises lesseps made about the benefits of the canal?
usefulness, great profitability, and a large size
