...FIN111: Introductory Principles of Finance Spring 2015 – School of Accounting, Economics and Finance WEEK 3: Parrino et al chapter 1: Critical Thinking 2, 4 & 6; Questions and problems 4, 7, 8, 14 & 23; Kidwell et al chapter 1: Questions and problems 1, 4 & 6. Parrino et al Chapter 1 Critical Thinking 2. The primary financial management decisions every company faces are capital budgeting decisions, financing decisions, and working capital management decisions. Capital budgeting addresses the question of which productive assets to buy; thus, it affects the asset side of the balance sheet. Financing decisions focus on raising the money the company needs to buy productive assets. This is typically accomplished by selling long-term debt and equity. Finally, working capital decisions involve how companies manage their current assets and liabilities. The focus here is seeing that a company has enough money to pay its bills and that any spare money is invested to earn interest. 4. Although profit maximisation appears to be the logical goal for any company, it has many drawbacks. First, profit can be defined in a number of different ways, and variations in profit for similar companies can vary widely. Second, accounting profits do not exactly equal cash flows. Third, profit maximisation does not account for timing and ignores risk associated with cash flows. An appropriate goal for financial managers who do not have these objections is to maximise the shareholders’...
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...TOPIC 1 TUTORIAL SUGGESTED SOLUTIONS Critical Thinking 1.2 What are the three fundamental decisions the financial management team is concerned with, and how do they affect the company’s balance sheet? The primary financial management decisions every company faces are capital budgeting decisions, financing decisions, and working capital management decisions. Capital budgeting addresses the question of which productive assets to buy; thus, it affects the asset side of the balance sheet. Financing decisions focus on raising the money the company needs to buy productive assets. This is typically accomplished by selling long-term debt and equity. Finally, working capital decisions involve how companies manage their current assets and liabilities. The focus here is seeing that a company has enough money to pay its bills and that any spare money is invested to earn interest. 1.4 Explain why profit maximisation is not the best goal for a company. What is an appropriate goal? Although profit maximisation appears to be the logical goal for any company, it has many drawbacks. First, profit can be defined in a number of different ways, and variations in profit for similar companies can vary widely. Second, accounting profits do not exactly equal cash flows. Third, profit maximisation does not account for timing and ignores risk associated with cash flows. An appropriate goal for financial managers who do not have these objections is to maximise the value of the company’s...
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...FIN111: Introductory Principles of Finance Spring 2015 – School of Accounting, Economics and Finance WEEK 3: Parrino et al chapter 1: Critical Thinking 2, 4 & 6; Questions and problems 4, 7, 8, 14 & 23; Kidwell et al chapter 1: Questions and problems 1, 4 & 6. Parrino et al Chapter 1 Critical Thinking 2. The primary financial management decisions every company faces are capital budgeting decisions, financing decisions, and working capital management decisions. Capital budgeting addresses the question of which productive assets to buy; thus, it affects the asset side of the balance sheet. Financing decisions focus on raising the money the company needs to buy productive assets. This is typically accomplished by selling long-term debt and equity. Finally, working capital decisions involve how companies manage their current assets and liabilities. The focus here is seeing that a company has enough money to pay its bills and that any spare money is invested to earn interest. 4. Although profit maximisation appears to be the logical goal for any company, it has many drawbacks. First, profit can be defined in a number of different ways, and variations in profit for similar companies can vary widely. Second, accounting profits do not exactly equal cash flows. Third, profit maximisation does not account for timing and ignores risk associated with cash flows. An appropriate goal for financial managers who do not have these objections is to maximise the shareholders’...
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...Accredited Tertiary Courses Listing 2012 Accredited Tertiary Courses Listing 2012 – as at 26 September 2012 1 2012 Accredited Undergraduate Courses AUSTRALIAN CAPITAL TERRITORY The Australian National University University of Canberra NEW SOUTH WALES Australian Catholic University Australian Institute of Higher Education Avondale College Charles Sturt University Kings Own Institute Macquarie University Southern Cross University Top Education Institute The University of New England The University of New South Wales The University of Newcastle The University of Sydney University of Technology, Sydney University of Western Sydney University of Wollongong Williams Business College NORTHERN TERRITORY Charles Darwin University QUEENSLAND Australian Catholic University Bond University Central Queensland University Christian Heritage College Griffith University James Cook University Queensland University of Technology The University of Queensland The University of Southern Queensland University of the Sunshine Coast SOUTH AUSTRALIA Flinders University Kaplan Business School The University of Adelaide University of South Australia Open Universities (conferred by Uni of SA) TASMANIA University of Tasmania VICTORIA Australian Catholic University Cambridge International College Carrick Higher Education Deakin University Holmes Institute Holmesglen Institute of TAFE La Trobe University Melbourne Institute of Technology Monash University Northern Melbourne Institute of TAFE RMIT...
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