Managerial Finance Essay Example | Topics and Well Written Essays - 1500 words - 1

Managerial Finance - set ab tabu ExampleAny effort that could increase profits above the hurdle will be unheeded since the manager after meeting such pre-set goals will relax.Again, setting hurdles will also sound against the regional executives since disparate policies affect coronations differently according to the given country. Each country has a different inflationary level, lending rate, political stability and other cultures which together or singly affects investments. Setting a uniform hurdle rate is being unfair to countries with unfavourable investment policies.2 Investing in Lower risk projects will normally be a favourite of the lower division managers since chances of them losing out on the investment is limited. This however, will always come with unfavourably low or unattractive incomes. age this might appear favourable to the managers, it may turn out to be a dislike of the shareholders. Shareholders would desire to maximize profits without regards to risks in volved, while the managers are more concerned about the risks involved in each venture.Risk is may be defined as the standard difference of return on an investment or portfolio of assets. It is measured using different methods including Value at risk. It helps business men to get nimble for the potentially turbulent market and is quoted in terms of percentageage and fixed time horizon (Kwon Joon Chang, 2008).If a 77% one day of value at risk, and the security of 6%. This means that the estimate for the face is that in the next one day, there is 77% chance that the security will not retreat more than 6% of its value. The equation may be written as VaR = infx R P (L x) 1 It does not take into account the downside potential in case the portfolio encounters the one percent chance that it exceeds the loss threshold. In other words, once the losses exceed the threshold,