This discussion has 2 parts:
4 Posts by classmates are:
Note1: Response to Colleague
As one of the brokerage firm’s financial analysts, I would respond to my colleagues by pointing out that higher ROE is considered positive for a firm, but there should be a close Examination when it increases. For instance, if the value of an item decreases more than the net income, the ROE will increase though this is not positive for a firm. The firm can respond by issuing a debt to repurchase equity, which reduces the item value of equity and increases the ROE ( Steger, 2017). However, it also increases the risk of the firms’ shares because of financial leverage.
Note 2: Opinion on Corporation’s practices
According to SEC, companies are allowed to round up the earnings of the estimates to the next whole numbers if the digit following the decimal is five and above. The figures less than four have to be reported in the lowest integers. The regulators, therefore, probed whether companies have been unlawfully rounding up the earnings. The agency theory is concerned with different stakeholders that have different ideas which do not match the company’s growth. The managers of various companies are trying to gain personal wealth by projecting the companies in a better way to increase market values.
The investment managers are also continually looking for institutional investors to increase their bonuses at the end of each year. A higher dividend per share translates to a confident forecast in a company’s future cash flow. Unfortunately, this idea will not last, and the investors will be forced to offload shares first which will lead to an intense reaction because of unrealistic expectations. All the works against financial management goals, which is to increase a company’s profit and market share, make the practices unethical (Tae-Il Yoon & Hae-Young Byun, 2015). In case the investors are unable to trust the financial reports of various companies, there is a high probability that they will move money to safer instruments. This, in turn, affects the company when it tries to raise revenues for expansion and therefore affects the economy as a whole.
Steger, D. (2017). The Returns of Private Equity Funds: A Swiss Perspective. The Journal Of Private Equity. https://doi.org/10.3905/jpe.2017.2017.1.059
Tae-Il Yoon, & Hae-Young Byun. (2015). Investor Relations, Corporate Governance Practices and Firm Value. The Journal Of International Trade & Commerce, 11(3), 107-127. https://doi.org/10.16980/jitc.11.3.201506.107
Moyer, R.C., McGuigan, J. R., & Rao, R. (2018). Contemporary financial management (14th ed.) Mason, OH: Cengage-Southwestern.
Nievergelt, Y. (2000). Rounding errors to knock your stocks off. Mathematics Magazine, 73(1), 47.
As a financial analyst at the brokerage firm, I would ask my colleague for more information about Potts Corporation than just ROE percentage, which is good at 20%. I will say that that’s a good indicator, but as a financial analyst, we have to gather more info about the companies that we present to our customers. Also, I would analyze the numbers more in detail because some wrong reasons could make the ROE go higher. At the same time, as high debt tends to inflate the ROE, I would check if the company has lots of obligations in the future.
A company’s earnings and associated ratios, such as earnings per share, are metrics that investors and other stakeholders use when making decisions. The SEC recently began investigating corporations for manipulating earnings via rounding errors. In the 2000s, it became evident that companies rarely missed those earnings estimates from their financial analysts.
Most of the time, investors buy shares of companies that beat analyst expectations and sell shares of those that miss. Based on this, firms have a strong incentive to report strong earnings. Unfortunately, very often, companies use accounting techniques to produce financial reports that present an overly positive view of a company’s business activities and financial position.
The SEC began investigating companies that have rounded up their earnings per share to the next highest cent. I think that earnings management is not a good practice because the managers can use any forms of earning manipulations, have only their best interest in mind, and do not consider the long-term viability of a company.
How to Analyze ROE of a Company. (2015) Retrieved from: https://www.equityfriend.com/articles/117-how- (Links to an external site.)to-analyse-roe-of-a-company.html
Moyer, R. C., McGuiGan, J. R., & Rao, R. P., (2018). Contemporary financial management. Boston, USA: Cengage Learning.
4th post will be visible afterwards
Plagiarism Free Papers
All our papers are original and written from scratch. We will email you a plagiarism report alongside your completed paper once done.
All papers are submitted ahead of time. We do this to allow you time to point out any area you would need revision on, and help you for free.
A title page preceeds all your paper content. Here, you put all your personal information and this we give out for free.
Without a reference/bibliography page, any academic paper is incomplete and doesnt qualify for grading. We also offer this for free.
Originality & Security
At Essay Assign, we take confidentiality seriously and all your personal information is stored safely and do not share it with third parties for any reasons whatsoever. Our work is original and we send plagiarism reports alongside every paper.
24/7 Customer Support
Our agents are online 24/7. Feel free to contact us through email or talk to our live agents.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
We work around the clock to see best customer experience.
Our prices are pocket friendly and you can do partial payments. When that is not enough, we have a free enquiry service.
Admission help & Client-Writer Contact
When you need to elaborate something further to your writer, we provide that button.
We take deadlines seriously and our papers are submitted ahead of time. We are happy to assist you in case of any adjustments needed.
Your feedback, good or bad is of great concern to us and we take it very seriously. We are, therefore, constantly adjusting our policies to ensure best customer/writer experience.