...UNIT-I Unit I: Nature of Financial Management: Meaning – Nature – Objectives – Scope- Functions of Financial Management – Financial forecasting – Financial Planning – Time Value of Money (NP) Nature of Financial Management: Meaning: Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise. Nature Scope/Elements 1. Investment decisions includes investment in fixed assets (called as capital budgeting).Investment in current assets are also a part of investment decisions called as working capital decisions. 2. Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby. 3. Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two: a. Dividend for shareholders- Dividend and the rate of it has to be decided. b. Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise. Get MBA study materials, articles, order business templates and stock market updates from or http://www.easymbaguide.in/ or www.easymbaguide.jimdo.com or www.easymbaguide.blogspot.com. Give your valuable feedback...
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...Capital Budgeting One of the most important decisions a financial manager can make involves capital budgeting. Capital budgeting is used to determine which fixed assets should be purchased. The purchasing of fixed assets is a form of a long-term investment. Allocating funds in the capital account is a form of capital budgeting. A financial manager will determine if the purchase of a capital asset or fixed asset is worth more over that assets life then it is for the cost to purchase it. In other words, they make sure that the asset would get the amount it cost plus a profit in return. Financial managers cannot seem to agree on a specific method that works better than the other when it comes to estimating and budgeting. Even in the world of academia, the determination to which method is more accurate or desirable is not certain. Financial managers and academics both have their own theories, however neither seem to agree. To determine if an investment is worth the cash to invest in, one of the ways a financial manager can determine profitability is that they will look at the investments net present value. The amount the investment would cost to payback each year and with how long it would take to pay for the investment may change the financial manager’s mind with if it is a worthy investment. The assets that are invested in are determined by the company’s business. A new building, large equipment, new software or investing into new products or ideas are examples of items...
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...helping Australians take control of their financial futures and own their tomorrows for over 160 years. Founded in 1849, AMP has played a substantial role in shaping modern Australia and New Zealand by helping millions of customers build financial security, providing protection for families and assets, and financing property and infrastructure projects. By delivering the right balance of security and performance, AMP helps its customers and clients own their tomorrows through: * financial planning and advice * superannuation, retirement income and other investment products for individuals * superannuation services for business and employer-sponsored schemes * income protection, disability, general and life insurance * selected banking products * investment including shares fixed interest, property and infrastructure About AMP AMP has been helping Australians take control of their financial futures and own their tomorrows for over 160 years. Founded in 1849, AMP has played a substantial role in shaping modern Australia and New Zealand by helping millions of customers build financial security, providing protection for families and assets, and financing property and infrastructure projects. By delivering the right balance of security and performance, AMP helps its customers and clients own their tomorrows through: * financial planning and advice * superannuation, retirement income and other investment products for individuals * superannuation...
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...Investments in Marketable Equity and Debt Securities (SFAS #115, for fiscal years beginning after 12/5/1993) |Reporting Category |Classification Criteria | |Held to Maturity |Debt securities the investor has the positive intent and ability to hold to maturity | |Trading Securities | | | |Debt or equity securities | | |held for immediate resale | |Securities Available for Sale |Debt or equity securities not classified as either securities held to maturity or | |(“catch all”) |trading securities | Debt Securities: (creditor relationship) US Gov. bonds and notes, municipal securities, corp. bonds/notes/paper, convet. debt. Equity Securities: (ownership interest) common, preferred, or other capital stock, share rights, warrants, and call or put options. Reporting Categories For Investments |Types of Securities |Characteristics ...
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...less than one year of experience in running an organization earn an annual salary ranging from $34,392 to $75,076. Those with more than 10 years’ experience, on the other hand, earn upwards of $105,757 per year”. As seen here, experience literally pays off big and is all about making good decisions in business. Some of the first decisions a business can make is determining the financial strategy. Financial Ratios Important to Large and Small Businesses Before a business can determine the best financial strategy, they must identify the strengths and weaknesses of their business. One way this is done is by computing ratios that compare values of key accounts listed on the financial statements. There are a lot of financial ratios that can be determined by business owners and managers through analyzing these financial statements. Depending on your size of business and the experience of the business people, will determine the best financial strategies for their firms. According to Bankrate.com, “A financial ratio is a simple mathematical comparison of two or more entries from a company's financial statements. Business owners and managers use ratios to chart a company's progress, uncover trends and point to potential problem areas in a business. Bankers and investors look at a company's ratios when they are trying to decide if they want to lend you money or invest in your company”. A small...
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...A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment. In simple language, a hedge is used to reduce any substantial losses/gains suffered by an individual or an organization. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts,swaps, options, many types of over-the-counter and derivative products, and futures contracts. Public futures markets were established in the 19th century[1] to allow transparent, standardized, and efficient hedging of agricultural commodityprices; they have since expanded to include futures contracts for hedging the values of energy, precious metals, foreign currency, and interest rate fluctuations. A mutual fund is a type of professionally managed collective investment scheme that pools money from many investors to purchase securities.[1] While there is no legal definition of the term "mutual fund", it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as "investment companies" or "registered investment companies."[2] Most mutual funds are "open-ended," meaning investors can buy or sell shares of the fund at any time. Hedge fundsare not considered a type of mutual fund. In the United States, mutual funds must be registered with the Securities and Exchange Commission, overseen by a board of directors...
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...FINANCIAL ACCOUNTING INFORMATION AND THE RELEVANCE/IRRELEVANCE ISSUE (Global Business & Economics Review Volume 5 No.2 December 2003 pp:140-175) Stanley C. W. Salvary, Canisius College ABSTRACT Some current research conclude that the numbers in financial statements are not relevant for three basic reasons. The numbers: (1) are not isomorphic with capital market values, (2) do not have a future orientation, and (3) are un-interpretable since they are based upon five different measurement attributes. The lack of isomorphism argument is invalid since actual current performance is not identical with the capital market expectations of future performance. The lack of a future orientation argument is invalid since financial statements capture what has happened and not what is expected to happen. Since a single measurement attribute is required to produce meaningful measures, the un-interpretability argument holds. A unique measurement attribute is identified in this paper to address this problem I. INTRODUCTION In Statement of Financial Accounting Concepts No. 1: Objectives of Financial Reporting by Business Enterprises (SFAC1) [1978], the Financial Accounting Standards Board (FASB) maintains that the function of financial accounting is to generate information useful to a group of users (investors and creditors) for decision-making. The focus on that specific function (decision-making) leads to a concern for predictive value, as opposed to feedback value, in financial statements...
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...FIRST SEMESTER 2014/2015 BKAF 3123 FINANCIAL STATEMENT ANALYSIS CLASS GROUP: B TUTORIAL 1: TOPIC 1 (GROUP NO. 8) Date: 23 Sept. 2014 PREPARED FOR: PROF. MADYA DR AZHAR ABDUL RAHMAN PREPARED BY: CHOY HUI NI 213209 PUN KAH MAN 213305 NURUL ‘AIN AMIRAH BINTI ROSLI 216423 1-15. Identify and discuss at least two areas of financial analysis. Financial analysis is a process to evaluate financial position and performance using financial statements. It consists of three broad areas which are profitability analysis, risk analysis, and analysis of cash flows. The common tools of financial analysis are ratio analysis and cash flow analysis. Profitability analysis is the evaluation of a company’s return on investment. It focuses on a company’s sources and levels of profits and involves identifying and measuring the impact of various profitability drivers. Profitability analysis also evaluates two major sources of profitability that are margins and turnover. Profitability analysis also focuses on reasons for changes in profitability and the sustainability of earnings. Risk analysis is the evaluation of a company’s ability to meet its commitments. Risk analysis involves assessing the solvency and liquidity of a company along with its earnings variability. Analysis of cash flows is the evaluation of how a company is obtaining and deploying its funds. This analysis provides insights into a company’s future financing implications. 1-18. Is...
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...1a) Derivatives are an important financial instruments that play significant role in today’s financial markets. It offers various types of risk protection and allow innovative investment strategies. A derivative is so called derivative because its value is derived from another financial security. According to Oxford dictionary, derivative is defined as something derived or obtained from another, coming from a source; not original. In financial jargon, a derivative security is referred to a financial contract whose value is derived from the value of an underlying asset or simply underlying. This underlying is usually stocks, bonds, foreign currency, or commodities. The derivative buyer or seller does not have to own the underlying security to trade these instruments. Several factors have contributed to massive development in derivative markets since the 1970s. First, the collapse of the Bretton Woods system of fixed exchange rates in 1971 increased the demand for hedging against exchange rate risk. The Chicago Mercantile Exchange allowed trading in currency futures in the following year. Second, the changing of its monetary policy target instrument by the US Federal Reserve (FED) promoted various derivatives markets. The adoption of a target for money growth by the FED in 1979 has led to increased interest-rate volatility of Treasury bonds. That in turn raised the demand for derivatives to hedge against adverse movements in interest rates. Later in 1994 when the US Federal...
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...assets, liabilities, credit files, etc... so that you can start edit financial statements, compute financial ratios, and evaluate current financial status and future financial prospects based on current condition and expectation for the future, for example, many of you guys are expecting to graduate soon and have a full time job, then you may form a reasonable expectation about your income, benefit from the expecting job in the near future, and adapt your plan accordingly. Such as starting saving right now for some future goal, but because right now your income might be low, so you can only afford saving a little for it, then after you graduate and get a full time job, you save more for the same goal, i.e, you set up a savings/investment plan for a goal in a dynamic fashion, and divide into several stages in savings/investments, each stage has the same investment, but with different investment/saving levels in different stages. As we said before, you need to identify the goals, and set priority and date to accomplish. Discuss your focus in the plan, it does not need to be fully comprehensive that covers all aspects your personal finance, you can choose to focus on several aspects of your personal financial planning. Discuss strategies to achieve those financial goals, such as saving how much in different periods for the goal, what kind of investment strategy you will take for the savings, how much investments allocated to stocks, how much to bonds, how much to liquid assets...
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...FINANCIAL SYSTEMS FU TURE CHALLENGES IN GROWING COMPLEX E NVIRONMENT DISSERTATION Roszak Sabrina Msc BC & IS Management 1 MSC IS&BCFinancial SYSTEMS FUTURE Challenges in growing complex environment DISS Acknowledgements It is not an easy task going back to school after seven years of work experience. And it is much harder going back to school being a young mum. For this reason, my deepest gratitude goes to my family who has always supported me and helped me in this initiative. Especially, I would like to thank my parents who always believed in me, my husband who encourages me and over all, my son, whose love gave me all necessary energy and strength. I would also like take the opportunity to thank all the teachers from the MSc, especially Ms. Hirzmann who encourages me in my professional choices and future carrier and my professor Mr. Parmantier who helped me complete this dissertation. F inally, I would like to express my gratitude to Mrs. Jalabert, SBM MONACO Finance Director for her time spent answering my questionnaire. 2 MSC IS&BCFinancial SYSTEMS FUTURE Challenges in growing complex environment DISS Glossary BI: Business Intelligence BSC: Balanced Scorecard CFO: Chief Financial Officer CPI: Cost Performance Indicator CPM: Corporate Performance Management CR: Corporate Reporting CRM: Customer Relationship Management EPM: Enterprise Performance Management ERP: Enterprise Resource Planning FASB: Financial...
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...defines the set and size of a firm’s real assets, which in turn generate the cash flows that ultimately determine its profitability, value and viability. In principle, a firm’s decision to invest in a new project should be made according to whether the project increases the wealth of the firm’s shareholders. For example, the Net Present Value (NPV) rule specifies an objective process by which firms can assess the value that new capital investments are expected to create. As Graham and Harvey (2001) document this rule has steadily gained in popularity since Dean (1951) formally introduced it, but its widespread use has not eliminated the human element in capital budgeting. Because the estimation of a project’s future cash flows and the rate at which they should be discounted is still a relatively subjective process, the behavioural traits of managers still affect this process. Capital budgeting is a process that is used to determine whether or not certain projects are worthwhile investments. Another term for capital budgeting is called an “investment appraisal.” Every firm has both a limited amount of capital available and a desire to deploy that capital in the most effective way possible. When a firm is looking at, for example, acquisitions of other firms, development of new lines of...
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...Users of Financial Information Managers Managers require Financial Statements to manage the affairs of the company by assessing its financial performance and position and taking important business decisions. Shareholders Shareholders use Financial Statements to assess the risk and return of their investment in the company and take investment decisions based on their analysis. Investors Prospective Investors need Financial Statements to assess the viability of investing in a company. Investors may predict future dividends based on the profits disclosed in the Financial Statements. Furthermore, risks associated with the investment may be gauged from the Financial Statements. For instance, fluctuating profits indicate higher risk. Therefore, Financial Statements provide a basis for the investment decisions of potential investors. Financial Institutions Financial Institutions (e.g. banks) use Financial Statements to decide whether to grant a loan or credit to a business. Financial institutions assess the financial health of a business to determine the probability of a bad loan. Any decision to lend must be supported by a sufficient asset base and liquidity. Suppliers need Financial Statements to assess the credit worthiness of a business and ascertain whether to supply goods on credit. Suppliers Suppliers need to know if they will be repaid. Terms of credit are set according to the assessment of their customers' financial health. Customers use Financial Statements...
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...6 Section 1.3 Finance Goal 8 Chapter 2 Personal Finance Status analysis Section 2.1 Family Assets Structure Analysis 9 Section 2.2 Family Financial Ratio Analysis 9 Section 2.3 Family Financial Features Analysis 10 Chapter 3 Financial Plan Section 3.1 The Basic Assumptions of Financial Plan 11 Section 3.2 Financial Advice 11 Plan Summary Financial management is a kind of life attitude, also a good living habits and enjoyable process of life. This financial plan detailedly analyzes the my family and my personal situation, financial information, and financial needs, on this basis, combined with the family members’lives and occupational characteristics, I have made the consumption and cash flow plan, investment and risk management plan, retirement plan, as well as the implementation of tracking and periodic inspection program, in order to timely adjust the plan according to personal circumstances change in the future. Financial Goals: 1. Reasonable arrangement consumption and investment spending, ensure quality of life, at the same time create a safe and stable...
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...Foundations for Financial Success Volume 1, Issue 1, March 3, 2011 TABLE CONTENTS OF What is financial literacy and why is it important? Financial literacy is the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being. More specifically, it refers to the set of skills and knowledge that allow an individual to make informed and effective decisions through their understanding of finances. Financial literacy involves a number of different areas of understanding. Learning about money and how it works is an important aspect, as well as understanding products like credit, loans, and investments. Competency in managing money appears to be a skill that doesn’t come naturally to everyone. Unless a person is exposed to the practice of money management, he/she is less likely to understand how it works and it long-term benefits. Without a financial education, it is easy to develop poor spending and financial habits resulting in significant negative consequences such as a poor credit rating, denial of credit, rejection for a checking account and bankruptcy, to name a few. Early financial literacy is the best way to prevent such consequences. In essence, personal financial literacy is much more than managing and investing money. It also includes making all the pieces of your financial life fit together. Achieving Financial Success you must understand and determine where your money goes. Here’s how you can start: Analyzing...
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