Finance

Question 1

Restructuring and economies of scale acquisition

Answer 1

Operating economies of scale
Economies of vertical integration
Combining complementary ressources structures
Utilisation of surplus funds
Utilisation of tax shields
Strategic growth
Diversification
Asset backing
Increasing quality of earnings

Question 2

Pricing efficiency

Answer 2

Prices reflect rapidly in an unbiased way all available information

Question 3

Operational efficiency

Answer 3

Refers to the level of costs of carrying out transactions in capital markets

Question 4

Allocational efficiency

Answer 4

Refers to the extent to which capital is allocated to the most profitable enterprise

Question 5

Weak form efficiency

Answer 5

All past prices of stocks are reflected in today’s stock price. Therefore tecnical analysis cannot be used to predict and beat a market.

Question 6

Semi strong form efficiency

Answer 6

Implies all public information is calculate into a stock’s current share price. Meaning that neither fundamental or technical analysis can be used to achive superior gains. Only information that is not publicly available can benefit investors seeking to earn abnormal returns on investments. All other information is accounted for in the stocks price and, regardless of the amount of fundamental and technical analysis one performs, above normal retirn will not be had

Question 7

Strong form efficiency

Answer 7

States all information in a market whether public or private in accounted for in a stock price. Not even insider information could give an investor tje advantage. This degree of market efficiency implies that profits exceeding normal returns cannot be made, regardless of the amount of research or information investors have access to.

Question 8

For corportae financial managers market efficiency can

Answer 8

Promote confidence reduce risk and uncertainty
Increase degrees of predictability
Reduce market costs
Reduce the need of excessive regulation
Reduce the need for proactive monitoring
Reduce the costs of regulation
Promotes investor trust in the market and thus encourages capital investment
Promotes allocational efficiency
Improves market information and therefore choice of investments