...to invest is a decision that should not be taken lightly. It requires the careful planning and research of the company that is a potential investment. It is the responsibility of a financial manager to ensure that his client is making a wise and responsible investment decision. The idea is to invest in a company that has growth potential and that will in the future generate a profit to essentially create a sound invest return for the investor. Introduction Deciding to invest is a decision that should not be taken lightly. Investing can make or break you financially depending on how you play the cards you are dealt. The purpose of this paper is to provide a rationale for the U.S. publicly traded company indicating the significant factors driving the decision to invest in the company. A profile of the investor that is suitable will also be provided. Five financial ratios will be used to analyze the past three years of the company’s financial data and the financial health of the company will be determined. Based on the financial review of the company, the risk level paired with minimization strategies will be determined. The paper will conclude with recommendations of the stock as an investment opportunity. Investments come in many forms. The key to any investment is knowing what type of investor you are and knowing exactly how you want to see your returns from your investment. A financial manager’s role is to educate the client about the risks and rewards of investing...
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... Your Objectives Let’s start with your objectives. While clearly the goal is to make more money, there are 3 specific reasons institutions, professionals and retail investors (people like you and me) invest: For Security, ie for protection against inflation or market crashes For Income, ie to receive regular income from their investments For Growth, ie for long-term growth in the value of their investments Investments are generally structured to focus on one or other of these objectives, and investment professionals (such as fund managers) spend a lot of time balancing these competing objectives. With a little bit of education and time, you can do almost the same thing yourself. Knowing Yourself – Your Risk Profile One of the first questions to ask yourself is how much risk you’re comfortable with. To put it more plainly: how much money are you prepared to lose? Your risk tolerance level depends on your personality, experiences, number of dependents, age, level of financial knowledge and several other factors. Investment advisors measure your risk tolerance level so they can classify you by risk profile (eg, ‘Conservative’, ‘Moderate’, ‘Aggressive’) and recommend the appropriate investment portfolio (explained below). However, understanding your personal risk tolerance level is necessary for you too, especially with something as important as your own money. Your...
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...'Entrepreneurship' Meaning An entrepreneur is someone who organizes, manages, and assumes the risks of a business or enterprise. An entrepreneur is an agent of change. Concept Entrepreneurship can be defined as the process of using private initiative to transform a business concept into a new venture or to grow and diversify an existing venture or enterprise with high growth potential. Entrepreneurs identify an innovation to seize an opportunity, mobilize money and management skills, and take calculated risks to open markets for new products, processes and services. Characteristics of Entrepreneurship • Interest and Vision The first factor for entrepreneurial success is interest. Since entrepreneurship pays off according to performance rather than time spent on a particular effort, an entrepreneur must work in an area that interests her. Otherwise, she will not be able to maintain a high level of work ethic, and she will most likely fail. This interest must also translate into a vision for the company's growth. Even if the day-to-day activities of a business are interesting to an entrepreneur, this is not enough for success unless she can turn this interest into a vision of growth and expansion. This vision must be strong enough that she can communicate it to investors and employees. • Skill All of the interest and vision cannot make up for a total lack of applicable skill. As the head of a company, whether he has employees or not, an entrepreneur must be able to wear...
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...do something with the money. That means that you will need to invest your money. A lot of people are afraid to do this but there is really no reason to be afraid if you know what you are doing. What are the differences between saving and investing? Your "savings" are usually put into the safest places or products that allow you access to your money at any time. Examples include savings accounts, checking accounts, and certificates of deposit. When you "invest," you have a greater chance of losing your money than when you "save." But when you invest, you also have the opportunity to earn more money than when you save. Investing is, well, everything else. Instead of putting your cash in a savings account, when you invest you are generally putting your money into company shares, government or corporate bonds or property – either directly or through a fund. This involves accepting the risk you may get back less than you put in, which is why the rewards – when they do come – are higher. Done well, investing should protect your money against the effects of inflation and give you a stronger return, compounded over time. Of course investment and saving are not separate things; in order to have money to invest you will need to save it. The important point is that you are better off investing the money that you do save rather than simply putting it under your mattress. In order to make sure that you have money to invest you need to make sure that you have a savings plan. The best...
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...Brown-Forman Analysis ACC/300 Brown-Forman Analysis George Garvin Brown in Louisville, KY, founded Brown-Forman in 1870 and they produce vast array of wines and spirits. The products are high quality and still include Old Forester Kentucky Straight Bourbon Whisky the company’s first product. It was America's first bottled bourbon and remains one of Brown-Forman's finest brands today. Brown-Forman has on staff over 4,000 people worldwide, with their global headquarters in Louisville employing approximately 1,000 people. They are not only one of the largest American-owned spirits and wine companies but they listed in the top 10 largest global spirits companies. What started as a young salesperson idea to sell top grade whiskey in sealed glass bottles has now flourished in to a company with sales of $3.8 billion dollars (BROWN-FORMAN Our Company, 2012.) The following will contain information on the organizations most recent financial statements. Corporate debt Securities A debt security in finance is when a lender such as a bank or corporation lends money to an interested party looking for financial gain in the form of bonds. Debt securities are interesting because they serve the purpose of creditors who loan money to a borrower and accrue interest to sell them. They have value. For example, a creditor creates a binding agreement with a borrower listing all the financial terms for loan payment in the form of a contract in which will carry value because...
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...ACFI 2005 Finance. 3. A customer has approached your commercial bank seeking to invest funds for a period of six months. The customer is particularly worried about risk following the GFC and the market volatility that continues to characterise world financial markets. Explain the features of call deposits, term deposits and CDs to the customer and provide advice on risk-reward trade-offs that might be associated with each product. Answer: Commercial banks are the main type of financial institution operating in all major international financial systems. They control a significant proportion of the financial asset within the financial system. Recently, the majority of developed economies have significantly reduced the level of bank regulation and there has therefore been a considerable growth in the commercial bank sector. Following the GFC, this deregulatory phase was criticised for having contributed to the crisis. Thus, it is natural for the customer to be worried about risk following the GFC and the market volatility that continues to characterise world financial markets. Since the core function of commercial banks is to gather savings from depositors and investors and use those funds in the provision of loans to customers this customer’s approached towards our commercial bank seeking to invest funds for a period of six months can be recognised. Call deposits- call or demand deposits are funds held in a savings account that can be withdrawn on demand. Features of call...
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...The real estate market values were dropping at the time. Donald made a risky bet by making a lot of real estate investments in Manhattan. Of course Trump's idea skyrocketed as the average land prices increased 6,000 percent from 1973 to present day(How). His extraordinary risks with large amounts of starting capital is what made Trump a billionaire and that is the art of his deal. The purpose of this paper is to evaluate the self made man by examining Donald Trump and the prototypical set rules on how to become a self made millionaire. To become wealthy, one has to do more than just simply earn money. People have to be smart and maintain their money first off, then, the next step is growing their money. In order to grow money, first invest the money. A investor makes their potential profit through a few categories of investing being: interests from savings or dividend paying stocks, cash flow from business or real estate, and appreciation of value...
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...No Risk, No Reward Have you ever taken a chance? If you have, how did you feel in the moment? Scared? Excited? Nervous? People take risks for many different reasons, but maybe the biggest reason is that there is a payoff that they get by accepting risk. So whether you are poor and desperate and need to take a shot at a better life, you are an investor trying to make a living, or if you are just trying to have a more interesting more enriching life, it usually starts with some risk. One reason you might take a risk is if you are desperate. For example, if you were part of a very poor family and could not afford to pay for daily needs such as food, you might take the risk of robbing a grocery store. In this case, you are risking being caught stealing and thrown in jail, for the reward of feeding your family. Would that be worth the risk? A recent example was in the news article written by Malcolm Foster and Elaine Kurtenbach about the tragic Japan earthquake of 2011. When the citizens of Japan found out about the earthquake, riots broke out as people started to hoard more than they needed. It was described as “[the] ensuing nuclear crisis” (Foster and Kurtenbach 1). In this case, the risk of markets running out of necessities created panic and hoarding of supplies. The Japanese people were willing to do whatever was necessary in order to survive. When you are young, you might also be desperate for a social life, or friends. For example, when my little...
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...Name: Tutor: Course: Date: Should people who download music and movies illegally be punished? The number of illegal movie and music downloads has steeply risen over the past decade. Music and movie producers invest immense time and resources in production hoping to not only recoup their investment but also earn profits. Neither music nor movies are spontaneously created. It is only logical that users pay for them and not exploit the producers through free illegal downloads. As a result, people who download music and movies illegally should be punished. A businessman invests to get returns, a soldier risks his life to earn a salary, a farmer toils to get a good harvest, and so is the case with other human activities. As a matter fact, all activities are directed towards some form of reward. Musicians and movie producers should not be denied their rewards. Sadly, illegal downloads denies them earnings from their hard work. Other than reward, illegal download of movies and music wipes out passion for creativity. It discourages artistic talent and makes artists feel their efforts are being exploited by people who enjoy watching yet pay nothing for it. This is devastating considering that the only way artists can grow is through the earnings generated from their existing works. The economy also suffers when illegal music and movie downloaders are let scot-free. It is undeniable that entertainment contributes immensely to national revenue (Osman 167). When no earnings are...
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...Your names: ___________________ Class time: ___________________ ACC350 - HW #7 (Chapter 10) Solutions Wednesday, October 23, 2013 Multiple Choice Questions 1. CD Productions needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 10 percent of total sales each month. Historically, sales on account have been collected as follows: 60 percent in the month of sale, 30 percent in the month after the sale, and the remaining 10 percent two months after the sale. Sales for the quarter are projected as follows: April, $120,000; May, $100,000; and June, $80,000. Accounts receivable on March 31 were $60,000. CD Productions would expect to have an accounts receivable balance on June 30 of a. $37,800 (90,000x0.1 (receivables from May sales) + 72,000x0.4 (receivables from June sales)). b. $42,000. c. $32,000. d. $28,800. 2. Which of the following changes would NOT change return on investment (ROI)? a. Decrease sales and expenses by the same percentage. b. Increase total assets. c. Increase sales dollars by the same amount as total assets. d. Decrease sales and expenses by the same dollar amount. 3. Beta Division had the following information: Av. operating assets in Beta Division $400,000 Operating income in Beta Division $50,000 Weighted average cost of capital 12% Minimum required rate of return 15% Operating Income Margin for Beta Division 20% What is the turnover ratio for Beta...
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...How to Write a Great Business Plan by William A. Sahlman Harvard Business Review Reprint 97409 Which information belongs – and which doesn’t – may surprise you. How to Write a Great by William A. Sahlman Few areas of business attract as much attention as new ventures, and few aspects of new-venture creation attract as much attention as the business plan. Countless books and articles in the popular press dissect the topic. A growing number of annual business-plan contests are springing up across the United States and, increasingly, in other countries. Both graduate and undergraduate schools devote entire courses to the subject. Indeed, judging by all the hoopla surrounding business plans, you would think that the only things standing between a would-be entrepreneur and spectacular success are glossy five-color charts, a bundle of meticulouslooking spreadsheets, and a decade of month-bymonth financial projections. William A. Sahlman is Dimitri V. d’Arbeloff Professor of Business Administration at the Harvard Business School in Boston, Massachusetts. He has been closely connected with more than 50 entrepreneurial ventures as an adviser, investor, or director. He teaches a secondyear course at the Harvard Business School called “Entrepreneurial Finance,” for which he has developed more than 100 cases and notes. Nothing could be further from the truth. In my experience with hundreds of entrepreneurial startups, business plans rank no higher than 2–on a scale from...
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...services to mass market, business, government and wholesale customers. 1) How are Verizon’s debt securities reported? A. Definition of debt security B. How is utilized on their financial statement? C. What did their financial statement reveal? 2) How are Verizon’s stock investments reported on their financial statement? A. Definition of stock investment B. How is it utilized on their financial statement C. What did their statements reveal about their stock investments 3) Why does Verizon invest in stocks and debt securities? A. To fund network expansion and modernization, repay external financing, pay dividends, repurchase Verizon common stock from time to time and invest in new businesses. 4) What are Verizon’s risks and rewards of equity versus debt securities? A. Verizon’s relative risks of equity versus debt securities: 1. Example 2. Example B. Verizon’s rewards of equity versus debt securities: 1. Example 2. Example Conclusion: Verizon is having difficulty matching its...
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...services to mass market, business, government and wholesale customers. 1) How are Verizon’s debt securities reported? A. Definition of debt security B. How is utilized on their financial statement? C. What did their financial statement reveal? 2) How are Verizon’s stock investments reported on their financial statement? A. Definition of stock investment B. How is it utilized on their financial statement C. What did their statements reveal about their stock investments 3) Why does Verizon invest in stocks and debt securities? A. To fund network expansion and modernization, repay external financing, pay dividends, repurchase Verizon common stock from time to time and invest in new businesses. 4) What are Verizon’s risks and rewards of equity versus debt securities? A. Verizon’s relative risks of equity versus debt securities: 1. Example 2. Example B. Verizon’s rewards of equity versus debt securities: 1. Example 2. Example Conclusion: Verizon is having difficulty matching its performance levels...
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...Discuss beta and its importance. Also, what type of investor would invest in a high beta stock and a low beta stock? Also, in your textbook, review the Real World case, focusing on "Beta, Beta, Who's Got the Beta?" on page 348. Is beta a useful tool? Why were the beta estimates discussed in the reading different? Beta is very important as it would be critical to make decisions on which stocks should be traded in certain market conditions. A trader would want to be in a high beta stock in robust condition and looking at low beta stocks in a low volume or bear type market. Advantages of beta would include: ease of calculation, simplicity of the application, finding the correct trading utensils. Disadvantages of beta would include: based on historical, data,difficult to gauge future returns, would not work with newly issued stocks. It would make sense for a short term trader to invest in high beta stocks as there would likely be high risk and high returns. Conversely it would make sense for a long term investor to invest in low beta stocks as it would allow for low risk and steady returns. In my situation with the exception of a few situations I would focus on low beta stocks. The beta values discussed in reading are different largely do to the the sample length used by the firms doing the calculations. “There are a few lessons to be learned from all of this. First not all betas are created equal. Some are computed using weekly returns and some using daily returns(Ross,2011)...
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...indenture. Bond indenture is a legal contract for a publicly traded bond. The structure of this contract outline incentives explicitly by detailing responsibilities, constraints, penalties, and oversight required. For example, contracts may specify interest and principal payment timing and amounts. Par value. Par value denotes face value or designated value of a bond or stock. Par value of a bond is typically $1,000 and the sum investors pay upon issue. It is also the sum received when they redeem the bond matures. Conversely, stock par value is frequently set at $1. In this case, par value is an accounting tool that shows no connection to the stocks’ market value. Principal. The term “principal” refers to a sum of money one borrows or invests. The face amount of a bond - the value printed on a stock or bond, or a debt balance. Principal does not encompass finance charges. Principal also describes an investor represented by a broker who executes trades on that investor’s behalf or an investor who trades for his or her own benefit. Principal also refers to a party affected by an agent’s decisions in a principal-agent relationship. Maturity. Maturity is the end of a bond’s life. In finance, maturity (or maturity date) designates the date of final payment on a financial instrument. Maturity value is the amount of money the bond issuer must repay at the end of a bond’s life. At that juncture, the principal and remaining interest payment are due. Face value and par value are terms...
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