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Financial Management

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Financial Management
Question 1)

1) Discuss puzzles and anomalies 2) Discuss three forms of market efficiency Marketefficiency is a measure of the availability(to all participants ina market) of the information that provides maximum opportunities tobuyers and sellers to effect transactions with minimum transactioncosts.

Types of Efficiency:
Operational efficiency: It refers to thecost to buyers and sellers of transactions in securities on theexchange. This may be promoted by creating as much competitionbetween market makers and brokers as possible, so that they earnonly normal profits and not excessively high profits.
Allocation efficiency: Our society has ascarcity of resources and it is important that we find mechanisms,which allocate those resources to where they can be mostproductive. Stock markets help in the process of allocatingsociety’s resources between competing real investments.
Pricing efficiency: It is a degree towhich the prices of assets reflect the available market placeinformation.

3 Forms of Market Efficiency:
(1) Weak Efficiency: Weak efficiencymeans that the price of the securities fully reflect price and trading history.
(2) Semi Strong Efficiency: Semi StrongEfficiency means that the price of securities Fully reflects all public information, including historical Price and trading patterns.
(3) Strong Efficiency: It means that theprices of securities reflect all information regardless of whetheror not it is publicly available, including historical price andtrading patterns.

Question 2) 1) Discuss the implications of the seperation of ownership and management
Professional Managerial Skills * The growth of a company comes with the demand for different skills to manage the operations of the company, meaning that the owners of a company may not entirely have the necessary skills and

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