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Class Assignment 2
Class Assignment 2
Class Assignment 2
PRITIKA GUNASEGARAN
PBS20101010
Table of Contents
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Class Assignment: PBS 20101010
Based on Sewak (n.d.), these 2 goals have their own focus either for
private or public listed companies. The major focus of profit maximization
goals of a corporation is that the company wanted to earn high income in
short-term and it is normally within 12 months. In contrast, wealth
maximization focuses on long-term benefit, where the stakeholders’
value can be increased over time. In general, public listed companies
focuses more on maximizing their shareholders’ wealth, whereas private
corporation will aim upon profit maximization.
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Class Assignment: PBS 20101010
Cash flow is the cash inflows and outflows from a business; whereas
accounting profit is the surplus of a business after deducting all the
related expenses from the revenue generated (Beers, 2021). Referring
to Boex (2015), cash flows is significant as it will provide relevant
information on the financial availability of a business from the statement
because it is a direct report on the availability of cash. However,
accounting profits can be easily manipulated as it includes non-cash
items, such as depreciation, upon arriving the profit (Boex, 2015).
In short, cash flows will shows the exact cash received and cash
payment within a business during a financial year, where all the non-
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Class Assignment: PBS 20101010
cash items will be added back to the accounting profit, to determine the
cash availability.
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Class Assignment: PBS 20101010
Referring to Ingram (2019), financial ratios are financial tools that can be
used to determine the company’s strength by performing simple
computation from the financial statements, such as balance sheet. Ang
et al. (2021) had explained that financial ratios have the ability to extract
the relevant information that are not obvious from the financial
statements. Thus, financial ratios are one of the ways that can be used
to analyze the firm’s financial stability.
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Class Assignment: PBS 20101010
Firstly, weak form of stock market efficiency is where the current prices
of the securities or stock prices are affected by past information in the
market (Finance Train. n.d.). Based on Investopedia (2020), the past
information is not useful in forecasting the future prices as the past data
had been incorporated in the stock prices (Finance Train, n.d.).
Lastly, strong form of stock market efficiency means that the securities
had included privately and publicly available information (Mahmud
Shaikat, n.d.). Referring to Marverick (2021), there is no special
information provided, which enable investors to gain abnormal profits.
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Class Assignment: PBS 20101010
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Class Assignment: PBS 20101010
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Class Assignment: PBS 20101010
References:
Ang, S.-K., Hong, J., Koh, A., Brigham, E. F., & Ehrhardt, M. C. (2021). Financial
management: theory and practice. Cengage Learning.
Beers, B. (2021, May 16). What's More Important, Cash Flow or Profits? Investopedia.
https://www.investopedia.com/ask/answers/111714/whats-more-important-cash-flow-
or-profits.asp.
Biswal, A. (2016, June 26). Profit Maximisation and Wealth Maximisation. LinkedIn.
https://www.linkedin.com/pulse/profit-maximisation-wealth-anshuman-biswal.
Boex, A. (2015). Why cash flow is more important than profit. Nebraska Business
Development Center, 1–3. https://www.unomaha.edu/nebraska-business-development-
center/_files/publications/cash-flow.pdf
Coombes, B. (2016, July 7). Why cash flow can be more important than profit. accountants
daily. https://www.accountantsdaily.com.au/columns/9285-why-cash-flow-can-be-
more-important-than-profit.
Ingram, D. (2019, February 12). The Advantages of Financial Ratios. Small Business -
Chron.com. https://smallbusiness.chron.com/advantages-financial-ratios-3973.html.
Investopedia. (2021, June 27). Financial Ratios to Spot Companies Headed for Bankruptcy.
Investopedia. https://www.investopedia.com/articles/active-trading/081315/financial-
ratios-spot-companies-headed-bankruptcy.asp.
Kenberry, K. F. (2020, December 9). Systematic Risk, Unsystematic Risk, Probability, and
Expected Value. Arbor Asset Allocation Model Portfolio (AAAMP) Value Blog.
https://www.arborinvestmentplanner.com/systematic-and-unsystematic-risk-
probability-and-expected-value-4/.
Mahmud Shaikat, M. N. (n.d.). What are the Three Forms of Market Efficiency. ORDNUR.
https://ordnur.com/academic-study/finance/what-are-the-three-forms-of-market-
efficiency/.
Maverick, J. B. (2021, June 29). The Weak, Strong, and Semi-Strong Efficient Market
Hypotheses. Investopedia. https://www.investopedia.com/ask/answers/032615/what-
are-differences-between-weak-strong-and-semistrong-versions-efficient-market-
hypothesis.asp.
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Class Assignment: PBS 20101010
McClure, B. (2021, June 26). Financial Ratios to Spot Companies In Financial Distress.
Investopedia. https://www.investopedia.com/articles/financial-theory/10/spotting-
companies-in-financial-distress.asp.
Why cash flow is more important than profit. Cash flow vs profit | Barclaycard Business.
(2019). https://www.barclaycard.co.uk/business/news-and-insights/why-is-cash-flow-
important.
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