Affiliated Managers Group (AMG) is a global company that specializes with operating boutique firms worldwide. It is a partnership that is able to distinguish the successful investments. Just like any other company, the number of investors is determined by the financial information of the business. Investors will mostly focus on the financial position of the businesses when they are making decisions regarding their investments. As such, AMG has to ensure that the balance sheet figures are reliable since they influence the investors’ decisions.
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The major balance sheet items that investors consider are assets and liabilities. Investors need to know the value of both assets and liabilities to be getting the required financial information of the company. Knowledge of the company instills confidence in the investors, thereby influencing their economic decisions. The financial position of AMG has continuously manifested growth of the company. The value of the net assets has been rising continuously and this has the effect of attracting investors.
Currently, the company has been registering an increase in the net assets, and thereby increased stock potential. This implies that most investors will be willing to invest in the company through a purchase of shares. As more investors buy the shares of the company, the demand for the company’s shares rise causing an increase in the share prices. This increases the popularity of the company, and hence its stock potential. This is because investors tend to buy shares of companies that are well known. Investors believe that such companies cannot be easily shut down, thereby suffering losses.
Over the last five years, the company has been making relatively high profits. However in 2008, the company made low profits due to the financial crisis that took place in 2007 and 2008. Since 2009, the company has increasingly made good profits from one financial period to the next period. However, the company should ensure that it does not limit its sale of shares. This ensures that the company obtains more capital that can be used to expand the business. Additionally, the company should come up with initiatives that ensure that it remains profitable in different economic times. For example, in times of financial crisis, the company will still be profitable and thus gaining competitive advantage over other firms in the industry.
Non-cash compensation is a mode of rewarding employees using other means apart from payment in cash. These methods are aimed at improving employees, as well as retaining the experienced ones. However, non-cash compensation is subject to abuse by management. This is seen where bonuses are not awarded fairly. This is because there might be problems in valuing the non-cash rewards.
There exists the risk of dilution of power for companies that overuse non-cash compensations. This is because such companies issue shares to many employees as bonuses. When a lot of shares are issued, the problem of dilution of control and power gets in. This happens because control that was previously concentrated to the owners is now distributed among some employees.
The benefits of non-cash compensation outweigh the disadvantages and thus it is a good way of rewarding employees. In fact, non-cash benefits act as an incentive to the employees thereby encouraging them to work harder. This has the overall effect of increasing productivity of the firm. Non-cash compensation is a cheap way of rewarding employees. As such, the chief financial officer should consider adopting it in the company. This is because it comes along with other benefits which include motivating the employees.
In conclusion, investors take their time studying the financial position of different businesses. As such, businesses should report the correct information that ensures reliability of the financial statements. A company that is popular has a great stock potential since investors can trust it. Non-cash compensation is an effective way that a company can use to reward its employees. It acts as an incentive to employees, thereby increasing their productivity.
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