...Finance theory and Financial strategy Strategic Planning means several things. But it certainly is a part of the decision-making in resource management of the business benefits. Finance theory has significant advantages in understanding the function of capital markets, the valuation of real assets and financial assets. Discounted cash flow analysis(DCF) is a tool that derived from finance theory which has been widely used. However finance theory also has little effect on strategic planning and there are three differences between financial theory and strategic planning: 1. Traditional financial theory and strategic planning might have some differences in language and culture. 2. Discounted cash flow analysis might be used in an incorrect way of strategy therefore it is not acceptable in terms. 3. Discounted cash flow analysis might fail to apply a strategic, even if it is used properly. The most relevant financial concepts in strategic planning is firms’ capital investment decisions and it is also a critical component of “financial theory”. The theory is focused on cash flow and return on the investment. The tool used in investment decisions is net present valued (NPV) which was calculated from present valued minus required investment or which was reduced to discounted cash flow formula because the net present value is a matter of cash flow that will gain in the future. [pic] ...
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...may not take risk to support new projects in lieu of existing programs • Time horizon may not be aligned with that of potential funders • Return expectations may be misaligned with the income generation ability of social enterprise • Hybrid structures can raise issues among the public and private sector players • Social entrepreneurs cannot rely solely on market signals & pricing to indicate to potential investors in achieving mission related impact Capital Needs of the Social Enterprise The following questions about financial drivers can direct the social entrepreneurs to the appropriate capital sources: • What opportunities & challenges exist to monetize the financial, social & environmental value (triple bottom line) • Is financial sustainability viable given mission of social enterprise? Does it require specific amount of startup capital to build operational capacity before becoming financially self sustaining? • What are the earned income opportunities for the enterprise? • Does the enterprise generate sufficient excess earned income streams to pay debt? • What assets does the enterprise own or control which can be used as collateral to support debt? • What are the working capital needs of the enterprise? • Does the enterprise project sufficient profitability to attract market rate debt or equity? 2...
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...A Study on Leverage and Firm Investment: Chinese Evidence Master of Science Thesis Huijie Bao Program Economics of Innovation and Growth Royal Institute of Technology (KTH) June 2010 Supervisor: Börje Johansson ABSTRACT This thesis focuses on the relationship between financial leverage and investment in Chinese listed firms. There are two novel aspects embraced here. One is choosing a marginal version of Tobin’s q instead of average q with Chinese data. Another one is taking the financial sector in to consideration. The research covers all sectors in the Chinese stock market. Main outcomes are listed below. Leverage imposes negative effects on investment, especially on non-state owned firms. Like Financials, Manufacturing and other highly regulated sectors, the inverse impacts of debt are week as well. However, marginal q fails in proof under the specific environment of the Chinese capital market which is still immature. High-leveraged firms experienced reverse influences of marginal q on investment. To sum up, over-debt financing indeed blocks the sustained investment. Relatively speaking, state owned firms in China suffer less since they are supported by the government and have fewer restrictions. Key words: financial leverage, marginal q, gross investment and state owned firms 2 ACKNOWLEDGMENTS Firstly, I would like to express my strong gratitude to my supervisor, Prof. Börje Johansson, whose profound knowledge, guidance and patience, greatly enhanced...
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...FIN 370 Week 1 Individual Assignment Defining Financial Terms Get Tutorial by Clicking on the link below or Copy Paste Link in Your Browser https://hwguiders.com/downloads/fin-370-week-1-individual-assignment-defining-financial-terms/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Finance System including circulation for money, grant of credit, investment opportunities, and banking faculties Without finance, there would be no resource allocations for operating or functional expenditures. Efficient market Efficient market, information is simultaneously available with corresponding funds example – stock market To make intellectual and well-intended fiscal decisions, information pertaining to funds must be readily accessible and available to provide insight and information for clients/investors/brokers. Primary market A market where the security is purchased directly from the issuer by the investor The primary market allows companies to offer bonds and stock to the public for the first time. It is closely related to the secondary market dependent upon one another to be most effective. Secondary market The transactions of stock from investors and dealers without the involvement of the company This market allows for the trading and selling of shares in stock. Without this market, the stock market would not exist...
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...Real Options in Corporate Finance Ellen Bjarnadóttir Thesis of 30 ECTS credits Master of Science in Financial Engineering June 2013 i Real Options in Corporate Finance (Notkun Raunvilnana við töku Fjárfestingaákvarðana) Ellen Bjarnadóttir Thesis of 30 ECTS credits submitted to the School of Science and Engineering at Reykjavík University in partial fulfillment of the requirements for the degree of Master of Science in Financial Engineering June 2013 Supervisor: Dr.Sverrir Ólafsson. Professor in Financial Mathematichs, Reykjavík University, Iceland Examiner: Dr. Rögnvaldur Sæmundsson Associate Professor, Reyjavík University, Iceland. ii Abstract The way companies value their investment opportunities has changed in recent years. With changing market conditions companies are constantly confronted with investment decisions that are increasingly uncertain. Known investment analysis such as net present value and decision tree analysis increasingly undervalue investment opportunities as they lack the flexibility and ability to modify projects when new information is available. A method based on financial option valuation has become the basis for a new technique to value high risk investment opportunities. It is based on valuation in the risk-neutral world and therefore eliminates investors’ attitude to risk. Real option analysis can capture the value of this increased flexibility, which previous methods have not been able to, such as the option to defer, abandon...
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...Running head: PROBLEM SOLUTION: INTERSECT INVESTMENTS Problem Solution: Intersect Investments Lisa Browning University of Phoenix Transformational Leadership MMPBL520 Problem Solution: Intersect Investments This paper will reflect the issues and opportunities that are surrounded by a company called Intersect Investment, a financial firm that is experiencing extremely difficult times over the last several years and had struggled to maintain its existence within the industry and its credibility on Wall Street. Intersect Investment has been resistant to change within its organization and the industry causing the organization to suffer overall. Intersect Investments CEO has realized that radical changes must take place for the company to survive but there has been conflict within the organization to prohibit the growth that is needed for longevity. New, recruit, Janet Angelo has been hired to implement the change model that CEO, Frank Jeffers believes in and that it can turn Intersect Investment around to not only be profitable but improving the company’s organizational culture overall. Janet Angelo is ready to take on the challenge. Although, she has the track record for successful strategies that she has implemented in the past but, this one will be a little different, because she has to complete this task in record time. A task she has not had before. We will also look at the interest rights and values of all stakeholders involved, such as executive board members...
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...share cost/risk with employees - New risk-sharing pension arrangements - Social cohesion and solidarity You are on your own(Low individual responsibility): - Prolonged recession - Employers reduce benefits and shift cost/risk to employees - Acceleration of DB to DC - Minimal social security provision the value of hiring mature workers includes lower turnover rates, higher levels of employee engagement and higher skill levels particularly basic skills like math, reading and writing. Three key requirements to maximize the opportunities presented by ageing: - Effective collaboration among key stakeholders -Transformational change in thinking is required. Thinking towards incentive structures that reward long-term planning and societies that value and honour old age as a productive life phase - Integrated retirement and healthcare solutions are needed 2. What is an ‘opportunity mindset’ as opposed to a ‘challenge mindset’ as discussed in the paper summarising the World Economic Forum report? Explain with examples. Answer: |Domain |Conventional Mindset...
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...The internship position at Barkley Financial in the stock and bond department was advertised as an opportunity to take a crash course in the industry. This particular full service brokerage and investment banking firm has offices throughout the US and is well established in the market that share information. Barkley’s solid presence in the market has made it a major player the world of finance with well over one billion dollars under its management, so the company selects interns with the intention of adding to the company’s solid base. The job was a way of fully experience the true aspects of day to day functions and operations of a major stock and bond company. While the experience itself is the central focus of the position, the internship was more than a temporary peek into the real inner workings of the world of finance. The coveted position was also an opportunity to establish a solid position with an established company after college. Each of the candidates selected to enter the internship program are considered as candidates to extend their association with the company. Interns that are successful are offered a full-time licensed stock and bonds advisor-broker trainee positions. The pressure to do the very best job possible was there since this was an opportunity to secure a highly lucrative sales position. The company also emphasized the opportunity for strong advancement opportunities. The company had a reputation of recognizing driven individuals, and allowing them...
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...undertake the investment. b) Base in the formula I = E + S we can demonstrate what is the best decision for the company. For that we will make a numerical example. State 1 State 2 Asset-in.place a 150 50 Investment Opportunity (NPV) b 20 10 P' I Debt (D) Lot of cash S E True Value (V) P'+E V V old new = = = 115 150 0 115 150 0 = = = = = 100 50 320 165 100 50 210 165 = 223,03 146,36 96,97 63,64 Little cash S E True value (V) P'+E V V old new = = = = 30 120 320 235 30 120 210 235 = 156,60 102,77 = 163,40 107,23 S↗ S↘ Payoff V in state 1 V in state 2 old old Issue & Invest (E=50) 223,03 146,36 Issue & Invest (E=120) 156,60 102,77 Do nothing (E=0) 150 50 With this example we can easily state that more cash bring more value to the old stockholders and most importantly, to the firm. c) Retained earnings – could avoid to issues stocks (assumption: the firm only uses risk-free borrowing to reduce the required investment and the investors are passive). “Firms should go to bond markets for external capital, but raise equity by retention if possible.” (Page 219 of the paper). Firms can build up financial slack by restricting dividends when investment requirements are modest. The cash saved is held as marketable securities or reserve borrowing power. Debt – makes possible to create value through tax benefits and by the non-necessity of revealing proprietary information to competitors, only to a financial institution (bank)...
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..."Global Investments" Please respond to the following: Construct an argument for the average investor to consider diversifying into international markets. Reilly and Brown (2012) identify three viable reasons to diversify an investment portfolio with foreign financial market offerings: 1) Restricting yourself to only U.S. offerings eliminates over 50 percent of the currently available investment opportunities. The growth and development of these foreign markets in the past 20 years has led to this point. Eliminating foreign investment opportunities from your portfolio may eliminate some great options to diversify and balance your risk. 2) Emerging foreign markets have led to a higher rate of return for foreign investments, on average. Eliminating these as an option also eliminates the opportunity for a higher return. A chart published by the Schwab Center for Investor Research with data provided by Ibbotson Associates and later published on the web in an article written by Michael Schmidt (n.d.) illustrates this higher return over historical periods: 3) With the option to select foreign investments that possess a very low market correlation to U.S. investments, the potential to obtain investments that balance and lower the portfolio risk should not be ignored. Michael Schmidt (n.d.) again provides an illustration, this time regarding the low long-term correlation between U.S. and International stocks: For me, the opportunity to earn a greater return is enough...
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...Understanding project evaluation is easy. Doing it is the real challenge.” The above argument is stating that you always need to consider every possible outcome of a project. I completely agree with this statement because whether or not your project is a success or failure, you need to make sure you’ve covered every angle and eliminate the chance of surprise or uncertainty. Every angle consists of the marketing side as well as the financial side seeing as these two sides are in a constant tug of war with each other as to whether an investment is a good one or not. From the financial side, a good investment is one with a positive net present value and whose value exceeds its costs. From the marketing perspective, a good investment must pass two tests: does the product or service have enough value to enough customers to support prices and volumes that exceed the costs of capital and does the company have enough sources of sustainable competitive advantages to exploit, develop, and defend the opportunity? If correctly applied, good financial analysis complements rather then contradicts good marketing and strategic logic. To start off, you need to select a base case by determining what will happen to your project if it is not successfully carried out to completion. If the base case is impractical, the incremental cash flows – the difference between the “with” and the “without” scenarios – will be ambiguous and/or defined incorrectly. Companies that indirectly assume...
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...Integrated Case study AN ANALYSIS OF THE CASE MAN GROUP (A) January 2013 Integrated Case Study: Man Group (A) Contents Page Acknowledgements Executive Summary Chapter 1: Introduction 1 Chapter 2: Case brief 4 Chapter 3: Problem statement and Analysis 8 3.1 Problem statement for Man Group Plc (A) 3.2 Literature review 3.3 Proposed plan of analysis 3.4 Sources of data Chapter 4: Analysis and Findings 22 An assessment of the current position Chapter 5: Proposed solution to Problems 29 5.1 Integrated discussion of the analysis 5.2 Recommendations 5.3 Proposed plan of action 5.4 Limitations of the study, scope for further research Chapter 6: Application to another case 35 6.1 Background 6.2 Description of the comparator company’s situation 6.3 Testing the recommendations on the comparator company Appendices References Word count: 11,980 Acknowledgements My sincere regards and gratitude goes to Almighty God who gave me strength and will to complete my studies successfully. I give my deepest regards to my supervisor Dr. K. Vijay Shenai for his guidance, support and dedication towards all his students. I extend my regards to all my friends who supported me through my studies and were of immense help to me. My warm regards and love for my parents who have always been an inspiration to me and have always supported me throughout my studies, this would...
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...apply for Investment Analyst role at Vinafund. As a young Economics graduate and deep passion in finance and investment, an opportunity to work at Vinafund is a path to my career success because I will be able to work in the industry I am inspired; in dynamic, competitive and challenging environment. My first exposure to investment industry is during my internship at Ho Chi Minh Securities Corporation (HSC), I used to work at Investment Banking Department, and then I have deepened my knowledge about financial industry, especially about investment. Investment analyst role fits my characteristics as a logical, patient and detailed person. Moreover, Vinafund, which is a leading financial institution, is outstanding compared to other competitors as it possesses methodical working process and collaborative culture, therefore I will have opportunities to develop even further. I am confident that I have sufficient skills and knowledge background to perform this role well. Firstly, I possess advanced quantitative and financial analysis skills. During my undergraduate degree, I have been trained intensively about quantitative analytical skills by wide range of assignments in Maths, Statistics and Econometrics and I was especially good at Econometrics. In addition, I was equipped with sufficient financial knowledge through modules like Accounting and Finance, Principle of Finance, Investment Management and Risk management. Therefore, I understand financial industry, financial assets and...
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...Stanley Case Study 2 Abstract Morgan Stanley was established by J.P. Morgan Jr in 1935 in New York. Before 1935, Morgan Stanley was only an investment department in J.P. Morgan group. Since its inception in 1935, Morgan Stanley has been a leader in investment management. The company provides a wide range of financial services for individuals and institutional investors. Morgan Stanley investment advisors educate clients at all stages of life in the benefits and risks of investing in mutual funds, stock, and bonds. Working with clients, they help to determine investment strategies based on goals and objectives, the time horizon for investing, and risk tolerance. The company relies primarily on sales force skilled in the investment areas that hold specific licenses to sell securities. In the first year the company operated with a 24% market share in public offerings and private placements. The main areas of business for the firm today are Global Wealth Management, Institutional Securities and Investment...
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...International Financial Reporting Standards Introduction: IFRS are a set of rules developed and issued by IASB (International Accounting Standards Board) which is an independent body based in London, England. These rules will apply uniformly to financial reporting by public entities worldwide. The adoption of IFRS is widespread around the world with 120 countries requiring public corporations to adapt IFRS. Accounting standards as we know are a modern development although its traces date back 500 years. They are very important in today’s world in which the ownership and control of firm are different. The Role of Accounting Standards: Accounting standards are very important for the smooth functioning of capital markets. The managers are better informed than outside parties about the data and performance of the firm. However the outside parties control the capital which they can provide to the firm provided they rest assured about the sound quality of financials of the firm so as to ensure the safety of their capital. The more the safety, the less will be the cost of capital to the firm as the creditors and third parties will demand less rate of return. So the managers need to adhere to accounting standards and get it audited by professional auditors so as to ensure the true and fair picture of business. Hence the accounting standards dictate the allocation of capital in complex capital markets and economies. Benefits of IFRS 3.1 Countries: Different accounting standards are adapted...
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