Financial Management Environment (3) Flashcards
What is an oligopoly?
Where a few large firms dominate the market
What is a monopoly?
Where one large firm dominates the market share
The power of imperfect competition allows companies?
To charge high prices, and have no incentive to improve their products
Benefits of imperfect competition for a company?
A large company can benefit from the kinds of economies of scale that can minimise prices
How may a propsective merger between two or more companies be referred to?
The regulatory authority
if a potential merger is investigated?
Authority must determine whether merger would be against the public interest
What are supply side policies?
Aim to improve efficiency, motivation or productive capacity
Examples of supply side polciies?
Deregulation
Re-training
Privatisation
Cutting income
What are corporate governance regulation?
Tighter regulation imposes costs ona business but it can also increase confidence of investors that company is being run responsibly
Benefits of corporate governance regulation?
May benefit businesses because share price of a company may increase if it is perceived as being lower risk
What are government assistance for business?
Grants may be available to attract firms to invest in depressed areas
What are green policies and sustainability issues?
Failure of the free market to recognise positive and negative externalities (e.g. pollution) may lead to government action
Two routes for a financing decision whe obtaining finance?
Directly from investors through financial markets
Indirectly through financial institutions that investors have deposited their money in (financial intermediaries)
What is a financial intermediary?
An institution bring together providers of finance and users of finance
What does a financial itnermediary do?
Links lenders with borrowers by obtaining deposits from lenders and then re-lending them to borrowers
