F9 評價類題目知識點總結

mp.weixin.qq.com

Advantages of ESOP期權激勵計劃:

1. Goal congruence: aligning調整 the objectives of managers and shareholders for both groups benifits as a result of an increasing share price.
2. Improve staff motivation and retention保留 and thus lower staff turnover costs.

Disadvantages of ESOP:

1. There is little evidence of a positive correlation正相關 between share option schemes and the creation of extra share value. Share prices frequently move for reasons that are nothing to do with the actions of managers.
2. Share prices frequently move for reasons that are nothing to do with the actions of managers.

Advantages of monopoly:

1. In certain industries, achieving a monopoly a company will be able to benefit from the kinds of economies of scale規模經濟 and hence minimize prices.
2. Establishing a monopoly may be the best way for a business to maximize its profits.

Disadvantages of monopolies :

1. Companies can impose higher prices on consumers.

2. The lack of incentive of competition may lead to companies have no incentive to improve their products or offer a wider range of products.

3. There is no pressure on the company to improve the efficiency of its use of resources.

Advantages of green policies:

1. If potential customers perceive the firm to be environmental friendly, some may be more inclined to buy its products.
2. Corporate image which embraces environmentally friendly policies may enhance relationships with the public in general or with local communities.
3. People may prefer to work for an environmentally friendly firm.
4. Ethical investment funds may be more likely to buy the firm』s share.

Advantages of early payment discount:

1. Potential to reduce the bad debts arising.
2. Offering a choice to customer of payment terms
3. Early payment reducing the receivable balance and hence the interest charge.

Disadvantages of early payment discount:

1. Difficulty in setting the appropriate terms
2. Unlikely to reduce bad debt in practice
3. Uncertainty of cash receipts will complicate cash budgeting
4. In practice customers pay over normal terms but still take the cash discount.

Advantages of factoring:

1. Saving in administration costs.
2. Reduction in the need for management control.
3. Particularly useful for small and fast growing businesses where the credit control department may not be able to keep pace with volume growth.
4. Financing provision
5. Credit insurance

Disadvantages of factoring:

1. Likely to be more costly than efficiently run internally.
2. Factoring has a bad reputation associated with failing companies.
3. Customers may not wish to deal with a factor.
4. Once you start factoring, it is difficult to revert easily to an internal credit control
5. The company may give up the oppotunity to decide to whom credit may be given.

Advantages of JIT system:

1. Reduction in inventory level, hence lower investment in working capital
2. Reduction in inventory holding costs
3. Reduced manufacturing lead times生產前置時間
4. Reduced scrap/ rework/warranty costs
5. Close relationship with suppliers
6. Improved labor productivity

Disadvantages of JIT system:

1. Too reliable on supplier for both quality and reliability
2. No buffer stock it may not appropriate in some business, for example, hospital, a stock-out could be fatal.
3. Potential overtime expenses from unanticipated order

Advantages of centralized treasury management:

1. No need for treasury skills to be duplicated重複.
2. Necessary borrowings can be arranged in bulk, at lower interest rates than for smaller amounts.
3. The group』s foreign currency risk can be managed much more effectively.
4. Bank charges should be lower since the carrying of both balances and overdrafts in the same currency should be eliminated.

Advantages of decentralized treasury management:

1. Greater autonomy leads to greater motivation. Division will manage their cash balances more attentively if they are responsible for them.
2. Local operating units should have a better fell for local conditions than head office and can respond more quickly to local development.

Advantages of payback period method:

1. Simple to understand and calculate.
2. A simple measure of risk, the longer the payback, the higher the risk.
3. May be important to companies with limited cash resources for budgeting purposes.

Disadvantages of payback period method:

1. It does not consider the time value of money.
2. There is no measure of return.
3. Ignores cash flows after the payback period.

Advantages of accounting rate of return (ARR):

1. Simple to understand and calculate.
2. Percentage is easier to understand
3. It considers the whole of the investment and is some measure of (accounting) return.

Disadvantages of accounting rate of return (ARR):

1. It does not consider the time value of money.
2. It is based upon (subjective) accounting profit.
3. It is not an absolute measure of return.
4. May lead to dysfunctional decision making

Advantages of NPV method:

1. It considers the time value of money.
2. It considers the whole life of project.
3. It is based on cash flow not the profit.
4. It is an absolute measure of return, and can reflect the size of project.
5. It should maximize shareholder』s wealth.

Disadvantages of NPV method:

1. Discount cash flow methods use future cash flows that may be difficult to forecast.
2. Acceptance of all projects with a positive NPV will not apply when the capital is rationed.
3. The cost of capital may be difficult to estimate and it may change over the life of the investment.

Advantages of internal rate of return (IRR):

1. It considers the time value of money.
2. It considers the whole life of project.
3. It is based on cash flow not the profit.
4. Percentage is easier to understand.
5. If IRR exceeds cost of capital, the project will increase shareholders wealth.

Disadvantages of internal rate of return (IRR):

1. It is not an absolute measure and cannot reflect the size of project.
2. Non-conventional非常規的 cash flow may give rise to multiple IRR.
3. Thes mutually exclusive互相排斥的 project cannot be ranked using IRR. A very small project may yield a very high IRR – but a larger project that yields a lower IRR but a higher NPV. In this case, NPV is the king.

Advantages of probability analysis:

1. Take risk into account by considering the probability of each possible outcome and using this information to calculate an expected value.
2. Gives more information than single point of estimation.

Disadvantages of probability analysis:

1. The probability used is usually very subjective.
2. The expected NPV approach calculates an average figure and therefore has little meaning if an investment is one-off
3. Expected NPV may not be capable of actually occurring.

Advantages of sensitivity analysis:

1. Can be used to assess the robustness of a strategy (project)
2. It provides management with more information than a single point estimate of an outcome.
3. It considers risk and uncertainty by offering alternative scenario.

Disadvantages of sensitivity analysis:

1. It does not provide decision rule
2. Interaction of factors is not considered
3. The probability that the changes examined will actually occur is not assessed.
4. Changes in key variable are normally assumed to persist throughout the lifetime of project.
5. The probability used is usually very subjective.

Advantages of going public:

1. Raise new money easier.
2. May use new shares as consideration for future acquisitions instead of cash resources and borrowings.
3. The opportunity for the owners of the business to realize part or all of their investment and to establish a market value for their retained shareholdings.
4. Enhance status of the company, a higher profile for its products, and improved credit ratings.

Disadvantages of going public:

1. The costs involved in going public.
2. Pricing of issue is critical.
3. The probable increase in costs arising from the strengthening of the companys reporting function (accountancy and auditing fee).
4. Increased outside pressure on the directors of the company, in particular with regard to the level of profits and dividends.

Advantages of rights issue:

1. Shareholders have the flexibility as to whether to buy the new shares or sell the rights.
2. Relatively simple and inexpensive.
3. Provides access to large amounts than may be available from retained earnings.
4. Investors generally regard a rights issue as a healthy sign.
5. All the gains from any investments will go to the existing shareholders.

Disadvantages of rights issue:

1. Only feasible when fairly large amounts of capital are required.
2. Can sometimes be taken as indicating problems within the company.
3. Due to some shareholders selling their rights, existing shareholders may lose a degree of control over the company.

Advantages of retained earnings:

1. Flexible, particularly for small amounts
2. No issue costs of actually raising the finance
3. No new shareholders involved, and hence voting is not affected
4. Shareholders may prefer this arrangement especially when tax is payable on dividend income, whereas there is usually no tax on capital gains

Disadvantages of retained earnings:

1. The size of the investment may exceed the retained earnings available
2. The reduction in dividend may worry shareholders
3. Shareholders dependent on a regular source of income by way of dividends may be forced to sell part of their holdings to generate cash if the dividends were to fall

Advantages of share repurchase:

1. If use surplus cash available to pay dividend would distort normal dividend policy.
2. It will increase EPS as the number of shares will be reduced after buy back.
3. Prevent hostile takeover.防止惡意收購
4. ROCE will increase as equity is reduced

Disadvantages of share repurchase:

1. It will increase gearing when buy back.
2. It may show a sign of company cannot make better use of the funds than shareholders.

Advantages of bonus issue:

1. Reduces the share price, making them more marketable, and no effect on shareholder』s wealth.
2. Retain cash in company
3. Decrease gearing of the company (compared to pay cash dividend), and increase the borrowing ability.
4. Shareholders may pay less tax on their income in the form of shares instead of cash dividend.

Disadvantages of bonus issue:

1. Future dividend payment will increase
2. May be seen by the market that the company is experiencing cash flow issues.

The weakness of Dividend Valuation Model (DVM):

1. It assumes that the future dividend growth rate is constant in perpetuity.
2. If there is no dividend paid the model will make no sense.
3. The model also assumes that business risk, and hence business operations and the cost of equity, are constant in future periods.

Advantages of Capital Asset Pricing Model (CAPM):

1. It considers only systematic risk reflecting a reality in which most investors have diversified portfolios from which unsystematic risk has been essentially eliminated.
2. It generates a theoretically-derived relationship between required return and systematic risk which has been subject to frequent empirical research and testing.實證研究
3. It is generally seen as a much better method of calculating the cost of equity than the dividend growth model (DVM) in that it explicitly takes into account a company』s level of systematic risk relative to the stock market as a whole.

Disdvantages of Capital Asset Pricing Model (CAPM):

1. Assigning values to CAPM variables

--The yield on short-term government debt, which is used as a substitute for the risk-free rate of return, is not fixed but changes on a daily basis according to economic circumstances.

2. Using CAPM to calculate a project-specific discount rate

--It is difficult to find suitable proxy betas, since proxy companies very rarely undertake only one business activity.

--Ungearing of proxy company betas uses capital structure information that may not be readily available. Some companies have complex capital structures with many different sources of finance. Other companies may have debt that is not traded, or use complex sources of finance such as convertible bonds.

Advantages of forward contract:

1. The contract can be tailored to user』s exact requirement.
2. The trader will know in advanced how much money will be received or paid.
3. Payment is not required until the contract is settled.

Disadvantages of forward contract:

1. The user may not be able to negotiate good terms, the price may depend on the size of the deal and how the user is rated.
2. Users have to bear the spread of the contract between the buying and selling price.
3. Forward contract may not be available in the currencies that the customer requires.

Advantage of money market hedge:

1. We do not have to worry about any future adverse movement because we use todays rate.

Disadvantage of money market hedge:

1. This approach has obvious cash flow implications which may prevent a company from using this method e.g. if a company has a considerable overdraft it may be impossible for it to borrow funds now.

推薦閱讀：