Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Question
Chapter 14, Problem 2DQ
Summary Introduction
To explain: The specific foreign industry where privatization is considered to be the most important factor.
Introduction:
Foreign Industry:
It is an industry where capital flows from one country to another and it grants extensive ownership stakes in domestic corporations and assets.
Privatization:
It refers to the process of transferring ownership of a business from the government or public sector to the private or non-government sector.
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Dynamic Energy Wares (DEW) has decided to change the manner in which it distributes its products to large companies. The change in the distribution system comes at a time when DEW’s profits are declining. The declining profits might not be the sole reason for the change, but it appears to be the primary impetus for the decision. It also appears that the new policy requiring DEW’s distributors to increase inventory levels before the end of the fiscal year will artificially inflate DEW’s sales for the current year. However, DEW’s new policy does not require the distributors to pay for any increased inventory until next year (six months), and any unsold inventory can be returned after nine months. So, if the demand for DEW’s products actually is decreasing, the impact will appear on next year’s financial statements. If the financial manager actually intends to artificially inflate DEW’s profits this year, she must realize that such actions eventually will “catch up” with her.
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Chapter 14 Solutions
Foundations of Financial Management
Ch. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - What is a key tax characteristic associated with...Ch. 14 - What are three forms of corporate securities...Ch. 14 - Prob. 6DQCh. 14 - Prob. 7DQCh. 14 - What are electronic communication networks (ECNs)?...Ch. 14 - Why is secondary trading in the security markets...Ch. 14 - How would you define efficient security markets?...
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