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Hi Sir,
I do not understand certain statements in lecture 3.
In lecture 3 (UK) : It was stated that “institutional investor input to boards is generally weak”…..
Does it mean that institutional investor proposed any form of changes, nobody listens?Europe : “There is greater stakeholder involvement than in the UK, representing the importance of bank rather than equity finance”
Does it mean that shareholders by the bank are more recognized and emphasized upon than equity finance shareholders?Conduct of AGMs : “unbundling of resolutions” –> Does it mean that they will discuss during the meeting so as to abolish certain resolution?
Lecture 4: Net Profit Margin can also be PAT/Sales right?
Thanks for your help?
1. No – it means that generally institutional investors to not bother giving much input (although more recently they have started to input more in some cases).
2. Not at all. It simply means that although in the UK the emphasis is on shareholders, in other countries other stakeholders are given importance.
3. Right, although generally if we are measuring the performance we look at profit before interest and tax. Tax is not something that can be controlled by management.
Hi Sir,
I do not understand certain statements in Lecture 5 and 6.
Lecture 5 : Vertical Integration – expansions up (backwards) or down (forward) the supply chain. Does it mean that the company will take over the supplier who will supply them raw materials, and take over the supplier who does the packaging for them?
Lecture 5: Concentric diversification – new products/market with technological/marketing synergy with existing products/markets. I do not quite understand this statement? – Does it mean we try to develop new products in existing market, and existing products in new market. However, it must be related expansion?
Lecture 5 : What is meant by cross subsidization within the group? Does it mean something like transfer pricing?
Lecture 6: It is expected future dividends that determine the share price, and therefore the shareholders should be indifferent between the alternatives outlined above.What does the alternatives refer to? Alternatives refer to that it is not dependent on the level of profits?
Thanks for your help.
In future, please do start a new thread when asking questions about different topics.
In relation to your questions on chapter 5, they are all terms that you should in fact have covered for Paper P3 (where they are examined in more detail – for P4 it is more just background).
Vertical integration is exactly as you have written.
Concentric diversification when a company acquires or develops new products or services that are closely related to its existing business, in order to enter one or more new markets.
Cross subsidisation is related to transfer pricing in that one company in the group may sell materials or services to another company in a group at a lower price than they sell externally.
Shareholders should in theory be indifferent between a small level of dividends (but therefore high future growth) and getting a high level of dividends (but therefore low future growth). More is said about this in future chapters (and the lectures that go with them) and indeed in the Paper F9 lectures because the idea of the level of dividend growth being dependent on the retention policy is revision of F9.
Hi Sir,
Do we get tax savings for the lease payments if we opt for option lease?
If yes, why the tax savings is not considered in the question 147 BPP revision kit?
There is no question 147 in the Paper P4 Revision Kit (and I have no idea why you have typed your question in this thread anyway – it has nothing at all to do with the previous posts in this thread)!
If you are referring to question 147 in the Paper F9 Revision Kit, then the tax savings on the lease payments have been considered in the BPP answer. It shows quite clearly as a cash inflow the tax saving on the lease payments of 36 per year.
I suggest that you watch my free lectures on this – the lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
In future, please do post any questions in the correct forum.
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