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This question asks about SFA FRAMEWORK to assess the proposed strategy
ACCEPTABILITY
THE GP marginof EVM is higher than swift while the net profit margin is lower .THE reason given for low net profit margin is due to EVM carrying high costs from its state owned days..i cannot get the reason please explain or elaborateThe gearing ratio is 30.9% much lower than that of swift this might be due to immature capital markets in ecuria ….my question is what does it mean by immature markets and how does it affects gearing ?
1 The assumption is that run companies are less efficient than private companies. In the latter, profits are vital and profits are increased by managing costs very carefully. For state owned businesses, profits are less vital as government (taxpayers) will come tomthe rescue, so costs are not as efficiently managed.
2 Immaturemcapital markets means that there be relatively few and relatively unsophisticated provideds if finance. Gearing might be low because there are fewer institutions willing to lend money. Fewer means greater competition for funds so posssible higher interest rates.
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