answers should be detailed responses (i.e. multiple sentences). Do not copy directly from the...


Answers should be detailed responses (i.e. multiple sentences). Do not copy directly from the text.Finance 370

What are the critical points to consider when comparing firms?


A firm is an enterprise carrying out business with the aim of making profits. The main objective of firms is to make as much profit as possible. Most firms enter into long term contracts with their workers to avoid costs like hiring and training.

Answer and Explanation:

Competitive advantage. For you to decide on which company to invest in, you must consider the company with a competitive advantage. As an investor, it is natural to want to put your money in a company with a better market platform than its peers. Investors like to invest their money in companies with fast going products due to the financial benefit that comes with it. Knowledge of the market advantage of a company gives the investor confidence to invest.

Knowledge on where the business is headed. An investor must consider the financial performance of a company. Here, he looks into the popularity of the firm's products in the market and how much revenue these products generate for the company. He must also familiarize himself with the cash flow in the organization. Cash flow in an organization determines the business span of an organization. Through this, he is able to determine which organization to create a long term business relationship with.

Stick to what you know. Before investing in a company, you must be familiar with the business carried out within the organization. Background knowledge of the business opens your mind on what you are really getting into and how the business operates. It is wise to compare companies operating in the same industry.

Learn more about this topic:

Shared Values in an Organization: Definition & Explanation

from Organizational Behavior: Help and Review

Chapter 18 / Lesson 13

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