Drawbacks or criticism of mm approach, Financial Management

Assignment Help:

Q. Drawbacks or Criticism of MM Approach?

Risk Perceptions of personal as well as corporate leverages are different: - It is incorrect to presume that 'personal leverage' is a perfect substitute for 'corporate leverage'. Liability of an investor is incomplete in corporate enterprises whereas the liability of an individual borrower is unlimited as even his personal property is likely to be used for payment to lenders.

Therefore the risk to the individual borrower is higher.

(2) Difference in cost of borrowing by the firm and individuals: - The supposition that firms and individuals can borrow at the same rate of interests doesn't hold good in practice.

(3) Convenience: - The corporate borrowing is further convenient to the investor because the formalities and procedures in borrowing are to be observed by corporate.

(4) Institutional Restrictions: - Institutional restrictions rise in the way of a smooth operation of arbitrage process.


Related Discussions:- Drawbacks or criticism of mm approach

Example on controlling working capital, Q. Example on Controlling working c...

Q. Example on Controlling working capital? Describe how a manufacturing company could control its working capital levels and impact of the suggested control measures. Solut

Caselet, suggestion regarding credit limit. should it be approved or not wh...

suggestion regarding credit limit. should it be approved or not what should be the amount of credit limit that electronics give to booth plastics

Active management in practice, Constant Duration To ...

Constant Duration To improve a buy and hold strategy a constant average duration is imposed for the managed portfolio during the full interest rate cy

Leverage, evaluate the importance of leverage in a small scale company

evaluate the importance of leverage in a small scale company

Participants in secondary market, PARTICIPANTS IN THE SECONDARY MARKET ...

PARTICIPANTS IN THE SECONDARY MARKET The players in the secondary capital market include: Individual Investors (Public). Companies. Mutual funds. Financial Insti

Define capital rationing, What is capital rationing?  Should a firm practic...

What is capital rationing?  Should a firm practice capital rationing?  Why? The term Capital rationing is the practice of setting dollar limits on what will be invested in new ca

Caselets, How would you judge the potential profit of Bajaj Electronics on ...

How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth Plastics and give your views to increase the profit.

Quantitative or mixed-methods study, Application: Critiquing a Qualitative,...

Application: Critiquing a Qualitative, Quantitative, or Mixed-Methods Study Over the last several weeks you have explored many qualitative, quantitative, and mixed-methods rese

Final stage of career, Q. Final stage of career? The final stage in one...

Q. Final stage of career? The final stage in one's career is difficult for everyone but is it hardest for those who have had continued successes in the earlier stages. After se

Compare diversifiable and nondiversifiable risk, Compare diversifiable and ...

Compare diversifiable and nondiversifiable risk. Which do you think is more important to financial managers in business firms? Diversifiable risk is able to be dealt with by of

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd