INPUT OUTPUT ANALYSIS
The input output analysis is a topic which requires application of matrices
The technique analyses the flow of inputs from one sector of the economy to the
other sectors thus the technique is quite useful in studying the interdepende
This is the determination of the amount of earnings to be distributed to shareholders as Dividends and
amount to be retained in the firm.
Retained earning are the most significant source of internal financing while on the other hand, divide
2 APT and CAPM compared
The Arbitrage Pricing Theory (APT) is much more robust than the capital asset
pricing model for several reasons:
The APT makes no assumptions about the empirical distribution of asset returns.
CAPM assumes normal distribution.
The Capital Asset Pricing Model (CAPM) specifies the relationship between risk and
required rate of return on assets when they are held in well-diversified portfolios.
Basic assumptions of CAPM
Investors are rational and they choose a
1.1 PORTFOLIO THEORY
In Lesson 2, we looked at investment decisions for assets held in isolation. That is,
we did not consider the synergistic effects of assets held together. This will,
however, be considered in this lesson.
A portfolio is a
For small companies, this is personal savings (contribution of owners to the
company). For large companies equity finance is made of ordinary share capital
and reserves; (both revenue and capital reserves). Equity finance is divided into