1. Explain why market prices are useful to the financial manager. The financial manager is responsible for giving financial advice and support to clients and colleagues that will enable them to make good business decisions. Particular work environments differ considerable and involve both public and private sector organizations such as retailers, corporations, financial institutions, charities, and even small manufacturing companies and schools (Financial Manager, 2011). Primarily, financial managers look at the market price in maximizing the value of the firm. The market value is the present value of the net cash flow divided buy the risk. Investors consider the firm’s future and present earnings, disadvantages or risks and other factors that will influence a firm prior to deciding to create an investment decision and the market price of the stock that will reflect all the information considering these factors (Arain, 2011). 2. Discuss how the Valuation Principle helps a financial manager make decisions. Valuation Principle is the analysis between values of benefits and costs. This gives an understanding for creating decisions in a company. When valuing a company in a competitive market. Its good price will always be the basis rather than the preference or opinion of a person or a firm. Hence, the valuation principle is the commodity or asset to the investors or firm that is recognized by the competitive market. The financial manager will weigh the costs and benefits of decision in utilizing that market price. Of course, if the benefits exceed the costs, the decision made by the financial manager will increase because of the firm’s market value (Fundamentals of Corporate Finance, 2011). 3. Describe how the Net Present Value is related to cost-benefit analysis. Cost benefit analysis is employed in order to evaluate projects. This gives the researcher or planner a set of values that is useful enough in determining the feasibility of a project from an economic point of view. Generally, it is simple and the results are easy to comprehend. Costs are associated with the company that is commonly much easier to measure and defined compared to benefits. This involves the operating and investment costs. Operating costs involves the materials needed to maintain an operation whilst the investment costs are incurred in planning and design such as the materials, labor, and construction costs. Benefits are, on the other hand, difficult to measure specifically for transport projects. These are diffused and extensive (Slack and Rodrigue, 2011). The relationship of net present value does not reside particularly on the cost-benefit per se rather it is viewed as part of the valuation principle. Net Present Value (NPV) is the difference concerning the present value of the project or the benefits of the investment compared to the present cost values. When the NPV positive for a project or investment opportunity, this means that the project can be implemented. It only means that the firm’s value and the wealth of the investors are increased. In contrast, negative NPV of the investments and projects would mean losing the money of the company if ever the project was implemented. This is in accordance with the NPV decision rule. In investment alternatives, the highest NPV investment alternative should be chosen. Think of it as receiving the NPV in cash once the highest NPV alternative is chosen. Now, if the project’s NPV is zero, the investment may show a gain or loss on the project (Fundamentals of Corporate Finance, 2011). 4. Explain how an interest rate is just a price. Prices actually signal the rise and fall of market economics. Basically, the answer starts with the…
Case Analysis: Fallow vs. Bankers Life and Casualty Company
Bankers Life and Casualty sold a long term care policy to Katherine Fallow in 2002. In 2009 Bankers Life and Casualty notified Fallow that she was eligible to receive long-term care benefits. Fallow began receiving home-care from licensed or certified home health care workers in the same year. Initially Bankers Life and Casualty paid the claims for home-care workers for Fallow. In December of 2009, during…
Running Head: LONG-TERM FINANCING
University of Phoenix
July 1, 2008
In this paper team d will compare and contrast the capital asset pricing model and the discounted cash flows model. The paper will also evaluate the debt/equity mix and the dividend policy. In addition, it will describe several characteristics of debt and equity as well as the cost. In closing, the paper will evaluate…
Long Term and Short Term Finances
The difference between long-term and short-term financing in the length of time the debt obligation remains outstanding. Short-term financing is typically for continuing operations and less than a year. Short-term is more often used for working capital requirements, or day-to-day operations of the business. There are 4 main types of short-term debt financing:
Overdraft is the instant extension of credit…
products in later weeks of the semester. All portfolio-related transactions will automatically be recorded online. The final investment report can include ONLY transactions that have been recorded online by the system.
The TOP THREE ranked groups in terms of profit will be awarded with a BONUS mark of 2% (out of 10%).
A printed copy of the investment report is to be submitted to the Faculty’s assignment box on the due date. Submission via Turnitin is NOT required for this assessment task. The answer…
company (employee council) and they also have a long vacation time
US firms want profit, only shareholders get a say.
Business Process: A series of activities that accomplish a business objective.
EX: for a university BP would be to get students registered for classes, it includes all the things that would make that happen.
Make schedule, Post in ISIS, Advise students, register student, Check preq, Bill
Involved in creating a Strategy: develop a long-range plan, align internal functions in support…
Long Term Detention
In the state of Ohio there are several juvenile detention centers that house juveniles that have committed a crime. The centers receive juveniles based on a referral from a law enforcement agency or the juvenile court system. Juveniles are admitted to the centers for crimes that range from aggravated robbery to assault. All of the centers have long term services and house a various number of juveniles. Most of the centers are government owned and house both girls and…
Breakeven analysis and cash budgeting are both short-term planning tools. It is equally important that long-term planning be periodically reviewed to ensure that the short-term goals are consistent with the long-term objectives, as well as to provide advance notice of the needs of the corporation so that appropriate decisions can be made and actions taken.
Suppose our Balance Sheet for the past year looked as follows:
2012 Balance Sheet:
Bonds - Premium or Discount
Bonds are a form of interest-bearing notes payable; obtaining large amounts of long-term capital (long term capital movements include FDI and movements of financial capital with maturity of more than one year, this includes equities) (Long term Capital, 2014). Upper management usually has to decide whether to issue common stock, equity financing or bonds (Accounting Coach, 2013). Issuing bonds is so they don’t affect stockholder control. Do to the fact that bondholders…
Hospitals and Long-Term Care Facilities
Dr. Angela J. Smith
Health Services Organization – HSA 500
February 17, 2011
Hospitals can be set up as nonprofit or for-profit facilities. The differences between the nonprofit and for profit hospitals will be discussed. Hospitals have experienced different trends in the last thirty years. This paper will identify at least three major trends that have occurred within the hospital sector. Three examples that describe and…
Long-Term Financial Decisions
CHAPTERS IN THIS PART
11 12 13
The Cost of Capital Leverage and Capital Structure Dividend Policy
INTEGRATIVE CASE 4 O’GRADY APPAREL COMPANY
The Cost of Capital
Overview This chapter introduces the student to an important financial concept, the cost of capital. The mechanics of computing the sources of capital-debt, preferred stock, common stock, and retained earnings are reviewed. The relationship between…