ACC501 Online Quiz No 01 Fall 2019 Solution Discussion
ACC501 Quize No1 Solution Fall 2019
The Primary textbook for the course is:
Essentials of Corporate Finance, by Ross, Westerfield and Jordan, fourth edition, McGraw Hill Publishers, ISBN 0-07-121057-7
Reference books will be:
Introduction to Finance by Lawrence J. Gitman and Jeff Madura, Addison-Wesley Publishers
Foundations of Financial Management by Stanley B. Block and Geoffrey A. Hirt, McGraw Hill Publishers
An overview of Financial Environment
Financial Statements, Taxes and Cash Flows
Time Value of Money and Discounted Cash Flow Valuation
Valuation of Stocks and Bonds
Net Present Value and other Investment Criteria
Capital Investment Decision
Risk and Return
Cost of Capital
Leverage and Capital Structure
Working Capital Management
Finance: A Quick Look
Four Basic Areas
o Business Finance o Investments
o Financial Institutions o International Finance
Addresses the following three questions:
What long-term investments should the firm engage in?
How can the firm raise the money for the required investments?
How much short-term cash flow does a company need to pay its bills?
Deals with financial assets such as stocks and bonds.
It covers the following issues: o Pricing Financial Assets
o Associated Risks and Rewards
o Determining best mixture of financial investment
Career opportunities in investment o Stock Brokerage
Portfolio Management o Security Analysis
Businesses dealing in financial matters o Banks and Insurance companies
Covers international aspects of corporate finance, investment and financial institutions.
Why Study Finance?
Marketing and Finance
o Marketers have to work with budgets
o Need to get greatest payoffs from marketing expenditures and programs o Cost and Benefit analysis of projects
o So, finance is vital for:
Design of marketing and distributions channels
Accounting and Finance
o Accountants are required to make financial decisions as well as understand the implications of new financial contracts
o Financial analysts make extensive use of accounting information
Management and Finance
o Business Strategy is always disastrous if financial planning is not adhered to.
What is Business Finance?
In order to start any new business, the following issues become vital o What long-term investment should be taken on?
o From where to get the long-term financing to pay for investment? Bring in other owners or borrow the money?
o How to manage everyday financial activities?
The Financial Manager
To create value, the financial manager should:
Try to make smart investment decisions.
Try to make smart financing decisions
Business Finance and Financial Manager
Financial Management Decisions o Capital Budgeting
o Capital Structure
o Working Capital Management
Financial Management Decisions
The process of planning and managing a firm’s long-term investments
Financial managers concern with how much, when and how likely is cash expected to receive
Evaluating the size, timing and risk of future cash flows is the essence of capital budgeting