Running head managerial finance 1
Itis true that-risk free investment tend to enjoy considerableprivilegeof demand in markets that are volatile. This is also because mostinvestors would quite often prefer to invest in assets with shorterlife duration of maturity. Such investments mature faster meaningthat there would be negligible or totally no interest rate laid onsuch investments. ((Gitman,1976))
Keepingthe three linkages together that is timing, cash flow and measure ofrisk necessarily stands for the success of growth in a particularcompany. The likes of BetaMax and Kodak had to fail because theycould not match together their risk in relation to timing. They keptup with the traditional way of recording that could only be sustainedfor an hour, unlike VHS who subdued them by doing a recording ofthree hours. Kodak did not take care of the risk of losing theircustomers while innovations counted by time. VHS also had to dropbecause they could not see the looming danger brought by the oncomingdigital recording. (Ross,Westerfield & Jaffe, 2005)
3.Tradeoffsto be madebetween Risk and Return and how itaffects stockvalue
Kodak’sfear of exploiting their digital camera technology had to costthemadversely. It was at this time that other companies in theindustry were struggling to make a bypass against their competitors.They feared that improving their quality of photography could impacton the demand for their products negatively since pricing had to goup while competitors still charging lower prices, here they felt thatcustomers could run to competitors. Unfortunately, their argument wascontrary to the outcome.
4.Linkages, how about a tangled web?
Inevery organization there is need to merge consumerism and corporatefinancial performance, where the organization promotes consumption byengaging in socialresponsibilities the market share also increasesirrespective of change in price whether increased or decreased. Theconsumers would start viewing every aspect of the organization as anelement of philanthropy.(Ross, Westerfield & Jaffe, 2005)
Gitman,L. J. (1976). Principlesof managerial finance.New York: Harper & Row.
Ross,S. A., Westerfield, R., & Jaffe, J. F. (2005). Corporatefinance.Boston: McGraw-Hill/Irwin.