If you wish to opt out, please close your SlideShare account. In order to find risk-adjusted discounting rate, we have to take help of proxy firm. decision that involve money. Decision Making: Whether to Diversify or not. Disadvantages Of Diversification The following are the disadvantages of diversification: Entities entirely involved in profit-making segments will enjoy profit maximization. There will always be unpleasant surprises within a single investment. The foremost disadvantage of financial accounting is that it considers only monetary transactions of organizations. Click to share on WhatsApp (Opens in new window), Click to share on LinkedIn (Opens in new window), Click to share on Facebook (Opens in new window), Click to share on Twitter (Opens in new window), Click to share on Pinterest (Opens in new window), Click to share on Skype (Opens in new window), Click to share on Tumblr (Opens in new window), Click to share on Telegram (Opens in new window), Click to share on Reddit (Opens in new window), Click to share on Pocket (Opens in new window), Click to email this to a friend (Opens in new window). We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. eval(ez_write_tag([[580,400],'efinancemanagement_com-medrectangle-4','ezslot_5',117,'0','0']));The following are the advantages of diversification: The following are the disadvantages of diversification: On understanding the advantages and disadvantages of diversification, we’ll see the types of diversification strategies. Diversification helps to maximize the use of potentially underutilized resources. For the purpose of decision making, we can adopt the technique of capital budgeting along with CAPM (Capital Asset Pricing Model). Thanks for your whole hard work on this web site. Investments 6. See our User Agreement and Privacy Policy. • The art and science of managing money, However, it can also prove to be a costly failure for certain entities. As of this date, Scribd will manage your SlideShare account and any content you may have on SlideShare, and Scribd's General Terms of Use and Privacy Policy will apply. Learn more. It can boost the growth of the firm thereby leading it towards wealth maximization. If you are not reading this article in your feed reader, then the site is guilty of copyright infringement. Financial Management • Acquisition of fund at optimum cost and its utilization with minimum financial risk. 1. If you continue browsing the site, you agree to the use of cookies on this website. Diversification is an act of an existing entity branching out into a new business opportunity. FINANCIAL SERVICESBYDr. • It is the study of how to make good It does not take into account various non-financial aspects such as market competition, economic conditions, political situation, government rules, and regulations, etc. Practicing Financial management is a costly activity for business organizations. Capital markets 3. Financial management 2. As of this date, Scribd will manage your SlideShare account and any content you may have on SlideShare, and Scribd's General Terms of Use and Privacy Policy will apply. You can change your ad preferences anytime. A mismanaged diversification or excessive ambition can lead to a company over expanding into too many new directions at the same time. Therefore, diversification limits the growth opportunities for an entity. However, a diversified entity will lose out due to having limited investment in the specific segment. Security Analysis and Portfolio Management - Investment-and_Risk, Vikram Sankhala IIT, IIM, Ex IRS, FRM, Fin.Engr, No public clipboards found for this slide. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. S.G. Rama Rao. We notice all concerning the dynamic medium you offer both interesting and useful steps on your web site and as well cause participation from other ones on that area of interest while my daughter is actually understanding a lot. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. In this form of a diversification strategy, the entity introduces new products with an aim to fully utilize the potential of the prevailing technologies and marketing system. Certain industries may fall down for a specific time frame owing to economic factors. A widely diversified company will not be able to respond quickly to market changes. These tools are costly to use and are time-consuming. cost of capital .....ch ...of financial management ..solution by MIAN MOHSIN ... No public clipboards found for this slide. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. financial management and control" referred to are the main actors responsible for the functioning of financial management and control in the public sector. Disadvantages of Financial Management Costly. Introduction to financial management and financial markets, valuation of long term security financial management, Financial Management - Analysis of Financial Statements "Ratios". Entities entirely involved in profit-making segments will enjoy. This form of diversification takes place when a company goes back to a previous or next stage of its production cycle. Looks like you’ve clipped this slide to already. The decision to diversify can prove to be a challenging decision for the entity as it can lead to extraordinary rewards with risks. What’s your view on this? eval(ez_write_tag([[728,90],'efinancemanagement_com-banner-1','ezslot_6',120,'0','0']));A diversification must be a well thought out step for an entity. Notify me of follow-up comments by email. Save my name, email, and website in this browser for the next time I comment. Share it in comments below. The focus on the operations will be limited, thereby limiting the innovation within the entity. In the sixth part there is a regulation on public internal financial control. 1. However, the entry of Quaker oats into the fruit juice business, Snapple lead to a very costly failure. • It is the study of how to make good Rigidity Sorry, your blog cannot share posts by email. Stock Broking• The process of investing in the share market,either individually or through a broker isknown as … Enjoy the remaining portion of the year. Lack of expertise in the new field can prove to be a setback for the entity. Being diversified can help in balancing such surprises. See our Privacy Policy and User Agreement for details. See our User Agreement and Privacy Policy. Clipping is a handy way to collect important slides you want to go back to later. –What assets to buy? Diversifying into a new market segment will demand new skill sets.

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