Principle of Finance 1 Week 8 Discussion
Prompt#1 For a market to be efficient, a market must be large and liquid. Accessibility and cost information must be widely available and released to investors at the same time. In the age of information Technology (IT), however, markets all over the world are gaining greater efficiency. For this discussion, discuss specific ways that IT has helped to make markets more efficient. As an investor, what information would you be most interested in before making investment decisions?
Information technology in the security sector has been continuously changing and on evolution over the years. The evolution has given a positive impact on the state of the markets and the companies involved. Some of these companies have been able to go public and raise money for the growth of their companies since venture capitalists can sometimes be introduced.
Information technology has given investors an opportunity to acquire information concerning markets in real time which is usually not limited to specific markets and are cheap. An investor, firm or company or organization can easily access to that information online. As shared by (Tetlock, 2007), by using the Internet which has ability to deliver news that involve the markets either in terms of data or analysis from the past, present to the future and benefits investors by giving them a platform to communicate between themselves. The use of web technology has allowed companies or investors to view the updates of the performance of their investments which was impossible a decade ago.
Information technology has led to reduced trading costs and a positive impact in the secondary markets that are being liquified. The obstacles that used to hinder the entry of the investors and those that provide services in the financial sector been lowered because of information technology. Accessing of market informations online has lowered costs incurred in acquiring them (Tetlock, 2007). The competition also in the company that deals with brokers has been neutralized and the investor has now fully access to the markets and benefits.
According to (Brunnermeier, 2016), the legal rights of investors have improved because of technology where it has had investors both who are inside and outside an investment be on the know. The information that used to be disclosed to certain companies and individuals have now been made public through the use of Internet. The market platform has been leveled such that it favors investors individually.
(MK Brunnermeier, 2016) shares that before making an investment, as an investor I would be interested to have accurate information on that form of investment. This information includes knowing the trading price in the market, it’s past, present and future analysis. This kind of information is very essential and would guide me on what to expect in terms of profit margin. Most of these require an assistance in technology like the Internet and some web applications.
Prompt#2 Financial decisions, return, risk, and the firm’s value are all related. The world of finance is intertwined in the daily decisions that are made by the organization. For this discussion, consider a key event that is being considered at your company. This could be the launch of a new product, opening another location, e.t.c. In your response, provide specific examples how these areas are related to the decision that the organization must make when deciding whether to move forward with this project.
According to (Saunders & Cornett, 2014), a company decides to expand either by launching a new product or opening a sub branch in another area when it has been doing well. Cross checking whether a company is ready for those is very much necessary. In this case I will be dealing with a company that has been doing well and it is ready for it to be expanded in another city or town. Before identifying the town or city the company is going to be based in, it is essential that an analysis of the future place be done so it can be identified as a central market place favorable for that company.
When the management in the company is good and the operational system are working well in the company then it gives room for expansion which was cited (Noussair & Trautmann, 2014). Training the staff on how to achieve their responsibilities is very essential. It creates a competitive team with the knowledge on what they are supposed to be doing. They will be able to set some goals for the company which will have the company grow faster leading to expansion.
When the profits in the company have been increasing consistently for some months or years then those profits are enough to be used in an investment to start that company in another town. As shared by (Saunders & Cornett, 2014), the profits should be able to cater for those expenses and also have plenty for the company to retain as well. These profits will signify that the company has the potential to succeed and give more profits in another town.
According to (Noussair & Trautmann, 2014), when the products and services have been analyzed and tested and the results show that they are worth investing in in a different town gives an upper hand for the company to go ahead with that project. When the brand of the company gets more popular and is accepted in the market then it gives way for more development and expansion of the business. Thus a clear indication that the projects should still go on.
CN Noussair, ST Trautmann, (2014), Higher order risk attitudes, demographics, and financial decisions.
A Saunders, MM Cornett, (2014), Financial institutions management
MK Brunnermeier, (2016), Bubbles, banking crisis
PC Tetlock, (2007), The role of media in the stock market, Giving content to investor sentiment