Financial Reporting Quality and Investment Efficiency Rodrigo S. Verdi The Wharton School University of Pennsylvania 1303 Steinberg Hall-Dietrich Hall Philadelphia‚ PA 19104 Email: rverdi@wharton.upenn.edu Phone: (215) 898-7783 Abstract This paper studies the relation between financial reporting quality and investment efficiency on a sample of 49‚543 firm-year observations between 1980 and 2003. Financial reporting quality has been posited to improve investment efficiency‚ but there has been
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principles are reflected in the capital-budgeting process. The basic idea is to view an investment project as a series of cash outflows and inflows over the life of the project. Once the 1 project’s cash flows have been fully identified‚ we adjust them to reflect how desirable these cash flows are in terms of timing and risk – this adjustment is called discounting – and add up the
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For the exclusive use of H. Thomas‚ 2015. HKU568 MITSURU MISAWA TOKYO DISNEYLAND AND THE DISNEYSEA PARK: CORPORATE GOVERNANCE AND DIFFERENCES IN CAPITAL BUDGETING CONCEPTS AND METHODS BETWEEN AMERICAN AND JAPANESE COMPANIES In the spring of 1997‚ it had been 14 years since Tokyo Disneyland opened its doors for business. Company executives at Japanese Oriental Land Corp. (OL)‚ known to many as the company that brought Disneyland to Japan [see Exhibit 1] were enjoying the success of their well-established
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market expansion by introducing new products‚ etc) Determining the Debt-to-equity Ratio For many business‚ a debt/equity ratio from 1:1 to 2:1 is considered satisfactory. The debt burden must also be weighed in relation to the profitability‚ cash flow and product or service cycle that determine the company’s ability to service the obligation. Main sources of equity 1. Personal Assets‚ close friends‚ relatives 2. Angels 3. Government Programs 4. Industry 5. Venture Capital 6. Strategic Partnering
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&RPage |1 Entrepreneurial Finance 2013 - Case Assignment Questions R&R R&R case brings up major themes that we will see over and over again in this course. This case also differs significantly from most of the other case you will read in this course as it provides a full story of an entrepreneurial venture. In most other cases in this course‚ the entrepreneur is faced with a decision/dilemma at the time of case. In these cases I will ask you to put yourself in the entrepreneur’s shoes and come
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2 Market Prices and the Valuation Principle 3.3 The Time Value of Money and Interest Rates 3.4 Valuing Cash Flows at Different Points in Time Copyright © 2012 Pearson Education. 3-2 Learning Objectives • Identify the role of financial managers and competitive markets in decision making • Understand the Valuation Principle‚ and how it can be used to identify decisions that increase the value of the firm • Assess the effect of interest rates on today’s value of future cash flows • Calculate
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overall economy (or stock market) as well as how that company performs within its industry sector. Comparative analysis is one way of determining valuation gaps among a company within its peer groups. Other valuation techniques could include discounted cash flow analysis and analysis of transactions that have recently occurred (ie: merger activity‚ and the relevant multiples of revenue/EBITDA upon deal closure.). Comparative analysis is easiest when the companies being evaluated are public‚ as information
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system. After the demand is met for the automatic paint system‚ the new light weight compressor will be produced and sold to meet the projected demand. Criterion: To maximize future cash flows When deciding the best alternative‚ the company should choose the one that will maximize future cash flow. Cash flows are cash transactions that either cause the company to spend or receive actual monetary units. The decision may change the level of operation‚ meaning it will affect both costs and revenues;
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rate of savings. As part of rationalization of operations‚ some assets will be sold generating a positive cash flow of $20 million net of tax in years 1 and 2 and $10 million in year 3. The analyst judges that these costs savings are rather certain‚ reflecting a degree of risk consistent with the variability in the firm’s EBIT. Accordingly‚ the analyst decides to discount the cash flow at the firm’s cost of debt of 6%. The merger will expand revenues through cross-selling of products‚ efficient
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pre-empt competition. Whereas on the one hand‚ the competition in the car industry has been intensifying‚ on the other hand‚ there has been a slowdown in the Indian economy‚ which has not only reduced the demand for cars‚ but has also led to adoption of price cutting strategies by various car manufactures. The industry indicators predict that the economy is gradually slipping into recession. Exhibit 1 Balance sheet as at March 31‚200 x (Amount in Rs. Crore) Source of Funds Share capital
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