$$\frac{Annual\ Interest}{Market\ \Pr ice}$$

(a)  

$$0=\left(PV\ of\ cash\ \inf lows\right)-\left(PV\ of\ cash\ outflows\right)$$

(a)  

$$\frac{Annual\ interest\ payment\ +\ \frac{\Pr incipal\ Payment-\ Market\ \Pr ice}{Number\ of\ years\ to\ maturity}}{\left(50\%\ x\ Market\ \Pr ice\right)\ +\ \left(50\%\ x\ \Pr incipal\ Payment\right)}$$

(a)  

This can be described simple as the percentage of profit the investor earns from the time of investment until maturity stated in % per year. It is the rate of return anticipated on a bond if it is held until the maturity date.

(a)  

"Financial management is an area of financial decision making, harmonizing individual motives and enterprise goals."

(a)  

Financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations."

(a)  

"Financial management is the process of putting the available funds to the best advantage from the long-term point of view of business objectives."

(a)  

Under finman, financial problems are analyzed and considered. A study of the trend of actual figures is made and ratio analysis is done.

(a)  

Previously, finman was required rarely but now the financial manager remains busy throughout the year.

(a)  

All managerial decisions relating to finance are taken after considering the report prepared by the finance manager. Financial management is the base of managerial decisions.

(a)  

The larger the risk in the business, the larger the expectation of profits. Finman maintains a balance between risk and proftiability.

(a)  

There is always coordination between various processes of the businesses.

(a)  

Finman is of a (a)   . Other activities can be decentralized but there is only one department for finman.

_________ provides a structure for decision-making in such areas as risk analysis, pricing theory through supply and demand relationships, comparative return analysis, and many other important areas. Finman is related to _________ in the sense that the decision of a financial manager must also be taking into consideration the economic environment in which the business exists.

(a)  

Finman is the interpretation of the data presented in accounting. The financial manager must know how to interpret and use these statements in allocating the firm's financial resources to generate the best return possible in the long run.

(a)  

It refers to income return on an investment.

(a)  

This is described as the yield rate that is based on market value.

(a)  

If the coupon rate is higher than the investor's required rate of return, intrinsic value is _____ than the principal amount, in this case the bonds are said to be issued at a _____.

(a)  

Modern approaches to finman apply a large number of mathematical and statistical tools and techniques. They are also called econometrics. Economic order quantity, time value of money, cost of capital, capital structure theories, dividend theories, ratio analysis, and working capital analysis.

(a)  

The profit of the concern depends upon the production performance. Production performance finance, because the production department requires raw materials, machinery, wages, operating expenses, etc.

(a)  

Marketing is another vital part of a firm’s profitability that is linked with financial

management. Marketing strategies such as holding inventories to provide uninterrupted service to

customers to increase sales are a cost of a firm that needs the area of financial management.

Managers need to know whether to spend much on these marketing strategies since they bring

about large chunks of their sales or just to forfeit these marketing strategies. Spending on

advertisement is also what financial managers keep an eye on depending on its relationship with the

company’s sales data.

(a)  

The provision of wages, salary, remuneration, commission, bonus, pension, and other

monetary benefits has become a major financial decision in the area of human resource

management. Should the firm give out a bonus to its employees? Or how much should a firm give as

a bonus to its top-performing manager? These are some questions that might be answered by

financial management.

(a)  

Strategic planning and management control are two important functions of top management. The

finance function provides the basic inputs needed for undertaking these activities.

(a)  

Quantitative methods such as linear programming, probability, discounting techniques,

present value techniques, etc. are useful in analyzing complex financial management

problems.

(a)  

Cost efficiency is a major strategic advantage to a firm, and will greatly contribute to its

competitiveness, sustainability, and profitability. A finance manager has to understand, plan and

manage costs, through appropriate tools and techniques including Budgeting and Activity-based

Costing.

(a)  

Sound knowledge of the legal environment, corporate laws, business laws, Import Export

guidelines, international laws, trade and patent laws, commercial contracts, etc. are again finance

executives in a globalized business scenario.

(a)  

Sound knowledge of taxation, both direct and indirect, is expected of a finance manager, as

all financial decisions are likely to have tax implications. Tax planning is an important function of a

finance manager. Some of the major business decisions are based on the economics of taxation. A

finance manager should be able to assess the tax benefits before committing funds.

(a)  

Every finance manager should be well grounded in treasury operations, which is considered

a profit center. It deals with optimal management of cash flows, judiciously investing surplus cash in

the most appropriate investment avenues, anticipating and meeting emerging cash requirements,

and maximizing the overall returns. In banks, it includes the design of new financial products from

existing products.

(a)  

Every finance manager must be up to date on the changes in services & products offered by

the banking sector including several foreign players in the field. Thanks to Government's liberalized

investment norms in this sector, the banking system has essentially been an important consideration

in financing decisions.

(a)  

Evaluating and determining the commercial insurance requirements, choice of products, and

insurers. analyzing their applicability to the needs and cost-effectiveness, techniques, ensuring

appropriate and optimum coverage, claims to handle, etc. fall within the ambit of a finance

manager's scope of work & responsibilities.

(a)  

A finance manager needs to know how to integrate finance and costing with operations

through software packages.

(a)  

In financial management, estimation of a firm’s needs is important as well as

estimating the amount of income that may enter the company or the amount of

expense that a company has to incur. Anticipation involves finding out how

much finance is required by a company.

(a)  

Once the required capital or finance is determined by the company, then the

company must find out how these finances will be procured from different

sources.

(a)  

The collection of a firm’s finances will now be determined by where it will be

spent. Will it be spent to purchase a fixed asset? Or will it be used to purchase

inventories to increase sellable products?

(a)  

Upon earning profits, appropriation means the decision of the firm to determine

the division of profits among shareholders, credit holders, or whether it will be

part of a firm’s reserved capital.

(a)  

This controls the financial activities of a company.

(a)  

In a business, there are different ways in which it can procure funds. Investors/Owners

can be the easiest source of funds as they have a direct stake in the company’s financing.

Another source of funds would be from the sales of the company. Externally, a company

can also tap the resources of a third-party such as a bank to finance its operations and

acquisitions.

(a)  

The financial data reported to a company must be interpreted by financial managers and

analysts for them to determine where a firm performs best or slacks. It is the evaluation and

interpretation of a firm's financial position and operations and involves the comparison and

interpretation of accounting data. The financial manager has to interpret different

statements. He is required to measure the company's liquidity, determine its profitability, and

assess overall performance in financial terms.

(a)  

Using the basic accounting equation of “Assets = Liabilities + Equities”, a firm may be able to

determine what level of its capital structure must be achieved for it to perform at a high

level. A firm may either have more debt than it has equity or the other way around. Or a

more balanced firm may opt to have its debt and equity at an equal level. The financial

manager has to establish an optimum capital structure and ensure the maximum rate turn

on investment. The financial manager should have adequate knowledge of different

empirical studies on the optimum capital structure and find out whether, and to what extent,

he can apply their findings to the advantage of the firm.

(a)  

This is popularly known as the 'CVP relationship'.

The financial manager has to ensure that the

income for the firm will cover its variable costs.

This will further be discussed in more advanced

management accounting subjects. What is

important to know is that the cost and volume of

a product/service have a direct effect on its

profit and this is what financial managers need to

understand to gain an edge in their company.

(a)  

__________ ensures the attainment of stability and growth. __________ is an important

responsibility of the financial manager. _________ is a dual function that

enables one to determine costs it has incurred, and revenues it has earned during a

particular period.

(a)  

The acquisition of ________ involves capital expenditure

decisions and long-term commitments of funds. Because of this

long-term commitment of funds, decisions governing their

purchase, replacement, etc., should be taken with great care

and caution. Financial managers need to know that funds used in ________ won’t be

available anymore to be used in their current operations.

(a)  

____________ decisions are most crucial; for they have long-term implications. They

relate to the judicious allocation of capital. Current funds have to be invested in long-term

activities in anticipation of an expected flow of future benefits spread over a long period.

________________ forecasts returns on proposed long-term investments and compares the

profitability of investments and their cost of capital. The financial analyst should be able to blend risk with returns to get the current

evaluation of potential investments.

(a)  

This involves the working capital equation of “Working Capital = Current Assets - Current

Liabilities”. Working capital is rightly an adjunct of fixed capital investment. It is a financial

lubricant that keeps business operations going. It is the lifeblood of a firm.

(a)  

(a)   constitute a crucial area of financial management. While owners are

interested in getting the highest dividend from a corporation, the Board of Directors may be

interested in maintaining its financial health by retaining the surplus to be used when

contingencies arise. A firm may try to improve its internal financing so that it may avail itself

of the benefits of future expansion. However, the interests of a firm and its stockholders are

complementary, for the financial management is interested in maximizing the value of the

firm, and the real interest of stockholders always lies in the maximization of this value of the

firm; and this is the ultimate goal of financial management.

Firms may expand externally through cooperative arrangements. (a)   consist of either the purchase or lease of

a smaller firm by a bigger organization. Mergers may be accomplished with a minimum cash

outlay, though these involve major problems of valuation and control.

(a)   is an important function of financial management, for the former has a

serious impact on the financial planning of a firm.

- Create Budgets

and Forecasts

- Determine the

sources of funds

(a)  

-Control Cash Flows

- Control Cash

Acquisitions and

Expenditures

-Addresses whether

company assets are

being used

efficiently

(a)  

-Investment

Decisions (Where

do you invest

scarce resources?)

- Financing

Decisions (Where

should the needed

capital be sourced

out?)

- Dividend Decisions

(How much of the

profit should be

reinvested or

returned?)

- Liquidity Decisions

(How should the

working capital be

managed?)

(a)  

generally involved working with corporations,

government, and other large institutions giving them strategic advice.

(a)  

among the most sought-after jobs in the financial world. Depending on the firm and the level

of the trader, these jobs can involve taking orders from portfolio managers or using discretion

on what to buy and sell.

(a)  

the most familiar to the general

public and is primarily focused on providing financial services to retail investors. The term

(a)   encompasses a variety of jobs whose practitioners have often been

referred to as stockbrokers, although the industry has tried to move away from that term.

incorporate knowledge of finance and economics with the ability to

write or speak intelligently about the markets. Individuals interested in these jobs should

possess superior communication skills as well as market savvy.

(a)  

some of the prestigious roles in the finance

industry and involve directly managing institutional and retail client portfolios.

(a)  

found at a variety of institutions including commercial and investment banks, asset

management firms, and hedge funds.

(a)  

We won’t take on additional risk unless we expect to be compensated with an

additional return

(a)  

A dollar received today is worth more than a dollar received in the future.

(a)  

This states that Cash flow and not profit is king in terms of financial management

(a)  

Only the cash flows that changes are the ones that count

(a)  

Why it’s hard to find exceptionally profitable projects

(a)  

The markets are quick and the prices are right

(a)  

Managers will not work for the owners unless it is in their best interests

(a)  

In evaluating projects, income taxes play a significant role in the decision-

making

(a)  

Some risks can be diversified away and some cannot

(a)  

Ethical dilemmas are everywhere in finance

(a)  

Refers to the concept that the worth of a certain sum of money today is more than the same sum of money tomorrow.

(a)  

Known in mathematics parlance as "discounting."

(a)  

It is the process of removing the interest factor in an amount to be received in the future and reduce or convert is to its value in the present.

(a)  

Known in mathematics parlance as compounding.

(a)  

It is a process of adding the interest factor in an amount received at present and increase or to convert it to its value in the future.

(a)  

$$\left(1+i\right)^n$$

(a)  

$$\left(1+\frac{i}{m}\right)^{nm}$$

(a)  

$$\frac{\left(\left(1+i\right)^n\right)-1}{i}^{ }$$

(a)  

$$\frac{\left(\left(1+i\right)^n\right)-1}{i}\left(1+i\right)$$

(a)  

$$\left(1+i\right)^{-n}\ or\ \frac{FV}{\left(1+1\right)^n}$$

(a)  

$$\left(1+\frac{i}{m}\right)_{ }^{-nm}\ or\ \frac{X}{\left(1+\frac{i}{m}\right)^{nm}}$$

(a)  

$$\frac{\left(1-\left(1+i\right)^{-n}\right)}{i}$$

(a)  

The process of determining a bond's price involves finding the present value of an an asset's expected future cash flows using the (a)   .

$$\frac{\left(1-\left(1+i\right)^{-n}\right)}{i}\left(1+i\right)$$

(a)  

$$\left(1+\frac{i}{m}\right)^m-1$$

(a)  

$$PMT\left(\frac{1-\frac{1}{\left(1+i\right)^n}}{i}\right)$$

(a)  

The application of accounting principles in deriving the book value makes it rare for the book value to be a good indication of the true or market value because (a)   are not considered.

$$\frac{CF_1}{\left(1+i\right)^1}+\frac{CF_2}{\left(1+i\right)^2}+\frac{CF_3}{\left(1+i\right)^3}+...$$

(a)  

This cannot be directly observed and must instead be estimated or calculated.

(a)  

It represents the "true" or "real" value of security. It is normally referred to as the "price."

(a)  

$$\frac{PV}{\left(\frac{1-\frac{1}{\left(1+i\right)^n}}{i}\right)}$$

(a)  

$$\frac{PMT}{i}$$

(a)  

It is the value of an investment following application of accounting principles.

(a)  

$$V=\frac{D}{r}$$

where: V=Intrinsic value of the share

D=The annual dividend

r=The required rate of return

(a)  

$$PMT\left(1+i\right)^{n-1}+PMT\left(1+i\right)^{n-2}+PMT\left(1+i\right)^{n-3}+...$$

(a)  

This represent perpetuity (having no maturity date). It has a fixed dividend payment and no binding contractual obligation of interest on debt.

(a)  

Time value of money is sometimes referred to as (a)   .

The value an investor is willing to pay for a security.

(a)  

Determined by multiplying the interest rate by the principal by the number of period that elapse between payments. It is usually used for short-term loans.

(a)  

Formula: Same as Yield to Maturity, except cash inflows refer to interest payments up to call date and the call price. Cash outflow still refer to amount invested.

(a)  

Payments are equal and are made at fixed intervals.

(a)  

It is an estimate of a bond's most likely rate of return.

(a)  

It can also be viewed as the bond's promised rate of return, which is the return that investors will receive if all of the promised payments are made.

(a)  

Also called the annual percentage rate (or quoted or stated rate).

(a)  

Also thought of as "interest on interest."

(a)  

Abbreviated EFF%, which would produce the same future value under annual compounding as would more frequent compounding at a given nominal rate.

(a)  

This provides a shorter way of obtaining the rate with a more systematic approach.

(a)