LTCM engaged primarily in convergence and relative value strategies. The 2 strategies that lead to their largest losses (3 out of $4.4bn) were interest rate swaps betting on swap spread convergence and selling volatility betting on decreasing volatility to historic levels. The first strategy involved taking a long and an offsetting short position, exchanging floating and fixed rates. This is a convergence trade as there was a specifiable future date by which convergence in the value of the positions should occur. The second strategy was a relative value trade; convergence was expected but not guaranteed except perhaps over a very long horizon.
In valuing a company whose CFROI is higher than average, HOLT assumes those returns will gradually fade toward the market norm because of competitive pressures. The rate of fade is determined in part by the volatility of the company's historic CFROI levels. That's important because HOLT's valuation
By doing so, a corporation may reduce commodity price affecting its share price. J&L Railroad had most of its revenue fixed for a long term, because it was industry practice for railroads to enter into long-term fixed-price contracts with their freight customers. On the other hand, fuel cost was a large cost item for J&L, and fuel prices have high volatility. Price competition in the railroad industry was fierce that railroads could not increase freight prices based on fuel price increase. Thus, J&L’s operating margin was exposed to the volatility of fuel prices.
These factors were either lifted from case facts or considered to be the advantages and disadvantages of either a conservative or aggressive debt policy. The group shall then state its recommendation for Du Pont - highlighting the factors of an ideal capital structure that relate to these facts. ALTERNATIVE 1: 25% debt-equity ratio PROS: • Conservative debt policy complements Du Pont’s current heightened business risk exposure. Du Pont’s basic businesses have increased their volatility; characterized by undifferentiated commodities and intense competition. Hence,
By finally giving in and devaluing the pound, Labours coherent reputation and authority was damaged. The whole issue surrounding the devaluation of the pound weakened the Labour party further by causing divides within. This weakening contributed to the election defeat in 1970. Furthermore Source 2 however does show direct evidence why labour had lost the election as it states “began for me as badly as it could of done” this tells us that the day had gone badly Roy Jenkins had done a relatively okay interview which didn’t relatively well amongst the public. However in the afternoon it became apparent that the export figures were down £45 million.
The loophole employed by Enron has since been plugged by the Sarbanes-Oxley Act, however, the external auditors’ failure to exercise professional judgment in relation to such dealings reflects poorly on the effectiveness of their audit practices. The external auditors’ inability to recognize the nature of these special entities and the transactions being entered into by Enron prevented the auditors from recognizing them as part of the larger Enron economic entity. As a result, revenues were significantly overstated while liabilities were
While this collapse took very little time to happen, the Roman Empire’s decline took about a century to occur. After the Pax Romana, the Roman Empire started to decline. The reasons were political and economic, and they had problems with foreigners. After the guard killed Commodus, they sold power to the highest bidder. This led to chaos every time a leader died.
They were losing to a nation very few had heard of and it was humiliating. However, many of the defeats to the Russian military occurred after the Revolution had started, not causing its outbreak, but merely adding to the opposition to autocratic rule by the Tsar and prolonging the Revolution. The Russo-Japanese War brought economic problems for Russia, and this therefore meant there was a significant lack of money to solve any other problems present Russia, hence partly being responsible for the outbreak of the 1905 Revolution. The war costed an extreme amount of money. As it resulted in failure no money could be gained from the invaded territories.
Andersen's remaining leadership disputed that the firm emphasized the selling of services over audit quality, replacing partners who were strong auditors but didn't generate enough revenue. By 1994, two-thirds of Andersen's revenue came from the consulting side. Coinciding with that shift, the influence of the firm's in-house ethics watchdog dimmed. Inside Andersen, the pragmatists carried the day. Partners throughout the sprawling Andersen Empire could see changes coming.
This incompatibility stifled the coalition's progress. The high hopes of a "land fit for heroes" meant this lack of progress especially hurt his reputation in office. This internal factor was thereby key in helping the Conservatives engineer his downfall. This lack of progress was also due to a general downturn in the economy: caused by WW1 and the growth of competition abroad. A policy of retrenchment was introduced after a short boom.