...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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...FINS1613 Business Finance Semester 2 – 2009 Version 1.0.0 12th October 2009 Contents Page 3 Page 7 Page 10 Page 14 Page 18 Page 23 Page 26 Page 29 Page 32 Page 38 Page 42 Basic Concepts Introduction to Financial Mathematics The Valuation of a Firm’s Securities Capital Budgeting Capital Budgeting Applications – Part 1 Capital Budgeting Applications – Part 2 Risk and Return The Capital Asset Pricing Model Cost of Capital and Raising Capital Capital Structure Dividend Policy Note: This course has prerequisites and, as such, these notes are written assuming that you have sound knowledge from those prerequisite courses. Business Finance– Semester 2 2009 2 Basic Concepts Basic Concepts Background Before we delve into the harder components of business finance, it is imperative that we learn the basics first. Types of Business Forms If you have previously studied Business Studies for the HSC, you can skip this section. Businesses are usually formed based on a set structure. The most common of these are: • Sole Proprietorships This is where the business is owned by a single person. It is very simple, fast to establish and generally has very minimal government regulations. The owner gets to keep all the profits himself so there is incentive to work harder. The downside is that it has unlimited liability (where if the business goes bankrupt, everything the owner owns can be taken by creditors). There is also difficulty in raising large sums of money as you are a single...
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...I. Classical Management Theory The Evolution of Classical Management Theory The Industrial Revolution was a time where innovation really began to change the way that products were produced and sold. The invention of machines to produce goods in the 19th century drastically improved productivity, which in turn lowered the cost to the consumer. The lower price resulted in a greater demand for products and thus a greater need for more factories and workers. Responsibilities of a manager As factories increased in number, managers continued to search for ways to improve productivity, lower cost, increase quality of their products, improve employee/manager relationships and increase efficiency. The focus shifted from using machines to increase productivity to how they could increase employee productivity and efficiency. When they did this, they began to notice some new problems inside their factory systems. Employees were dissatisfied with their current working conditions, and many lacked the necessary training for how to do their work efficiently. Managers then began to formulate and test possible solutions, one of which was to find the best possible way for workers to perform and manage their tasks. The research resulted in the development of classical management theory. Factory workers must be placed in suitable job roles. Expansion of Classical Management Theory Classical Management theory expanded throughout the first half of the...
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...University-Commerce, Commerce, Texas, USA Abstract Purpose – Fayol’s theories were the original foundation for management as a discipline and as a profession. Also Fayol was the first to advocate management education. Yet he has critics who revile him (or at least disparage his work) as well as followers who respect and revere him. This paper intends to enlighten today’s practitioners and academicians about the relevance and value of Fayol’s theories today. Design/methodology/approach – The paper addresses Fayol’s contributions as well as the disparagement and the reverence. It compares Fayol’s work with that of Follett, Mintzberg, Taylor, and Porter. In addition, it demonstrates the original and current interpretation and application of his theories. Finally, it indicates the alignment of Fayol’s theories with strategic leadership and management. Findings – Fayol’s theories are valuable and relevant for organizational leaders because Fayol was a practitioner who documented theories that worked best for him and his co-workers. While there are those who criticize Fayol’s theories, there are many others who respect them and find them useful as academicians and as practitioners. The theory of management functions aligns well with strategic leadership and management models and theories. Originality/value – The paper is the first to integrate Fayol’s theories with a strategic leadership model. Keywords Management theory, Management history, Leadership Paper type General review Henri...
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...Life-Cycle Investing in Theory and Practice Zvi Bodie Life-cycle investing, especially investing for retirement, is today a matter of intense concern to millions, perhaps billions, of people around the world. In the past three decades, many respected finance theorists and behavioral scientists have studied how people should and actually do make investment decisions. Theorists have produced optimization models that capture important features of reality, such as changing investment opportunities, unpredictable labor income, habit formation, and transaction costs. And at the same time, scientific studies of actual financial behavior have revealed that people consistently make certain mistakes because of lack of knowledge, faulty logic, cognitive dissonance, and biased statistics. The new science of finance has had a profound impact on the practice of institutional risk management.1 Sophisticated enterprisewide risk-management systems are widely used today by financial service firms and a growing number of nonfinancial companies (DeLoach 2000). In comparison, applications of this new science to the important life-cycle issues households face have been limited. Online financial planning “ tools” “ and optimizers” far behind the best lag theory. Contemporary theory uses multiperiod hedging techniques and contingent-claims analysis, but the quantitative models routinely used by professional financial planners appear to be ad hoc blends of trial-and-error Monte Carlo forecasting and Markowitz’static...
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...performance. 2. Describe four content motivation theories. 3. Describe two process motivation theories. 4. State how reinforcement is used to increase performance. 5. List the four steps in the model for giving praise. 6. Identify the four parts of the model for writing objectives. 7. Explain the three steps of managing by objectives. 8. State ways to enrich, design, and simplify jobs. 9. Explain possible limitations of using motivation theories outside North America. 10. Define the following 16 key terms (in order of appearance in the chapter): motivation performance formula content motivation theories needs hierarchy two-factor theory manifest needs theory process motivation theories expectancy theory CHAPTER OUTLINE The Importance of Motivation What Is Motivation and Why Is It Important? How Motivation Affects Behavior, Human Relations, and Performance Copyright © 2008 by The McGraw-Hill Companies. All rights reserved. equity theory reinforcement theory giving praise objectives management by objectives (MBO) job enrichment job design job simplification Content Motivation Theories Schedules of Reinforcement Organizational Reinforcement for Getting Employees to Come to Work and to Be on Time Motivation Techniques Giving Praise Needs Hierarchy Objectives and MBO ERG Theory Job Enrichment Two-factor Theory Job Design Manifest Needs Theory Putting the Motivation Theories Together How Organizations Meet Employee...
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...Management Theory and Practice PG Management Theory and practice applied in Apply [pic] Professor: Prepared by: Executive Summary Different management techniques are adopted by different managers in order to engage the employees and to make structure of the organization. For these purpose different theories has been proposed by different classical authors. Classical theories deal with the perception that only managers have authority to deal with the management and its structures. They have sole authority to implement all the planning in organization. This is a bureaucratic style of management. This theory was highly criticized by contemporary theory authors. These authors have led the management styles into new theories. Modern theory has dealt with the transformed management system. This system has not given authority only to managers, but employees are also allowed to give their recommendations and suggestions to the employees. While discussing about Apple, it is a huge successful organization in terms of its innovative product. But, there is a drawback in the management of Apple that it is only focusing upon the decisions of the managers. They are still adapting the old method of management of organization. That is the reason; its old method of management is highly being criticized. There is a need for Apple to bring change in its current organizational structure. The reason is that, if any organization does not accept...
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...C H A P T E R 1 The Nature and Scope of Managerial Economics chief of Omaha, W arren E. Buffett, the renowned chairman andstartedexecutive officerpartnership Nebraska-based Berkshire Hathaway, Inc., an investment with $100 in 1956 and has gone on to accumulate a personal net worth in excess of $30 billion. It is intriguing that Buffett credits his success to a basic understanding of managerial economics. Berkshire’s collection of operating businesses includes the GEICO Insurance Company, Buffalo News newspaper, See’s Candies, and the Nebraska Furniture Mart. They commonly earn 30%–50% per year on invested capital. This is astonishingly good performance in light of the 10%–12% return typical of industry in general. A second and equally important contributor to Berkshire’s outstanding performance is a handful of substantial holdings in publicly traded common stocks such as The American Express Company, The Coca-Cola Company, and Wells Fargo & Company. As both manager and investor, Buffett looks for ‘‘wonderful businesses’’ with outstanding economic characteristics: high rates of return on invested capital, substantial profit margins on sales, and consistent earnings growth. Complicated businesses that face fierce competition or require large capital investment and ongoing innovation are shunned.1 Buffett’s success is powerful testimony to the practical usefulness of managerial economics. Managerial economics answers fundamental questions. When are the characteristics of a market...
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...Description of Financial Theories ____________________________________________________________ _________________ Theory General Description___________________ 1. Efficiency Theory Proposes that the prices of stock reflect all applicable information about the value of the stock. 2. Theory of Investment Highlights the importance of making educated investment decisions. 3. Agency Cost Theory Managers of the business making decisions on behalf of the stockholders. 4. Agency Cost of Free Cash Flow Theory Reinvesting excess capital. 5. Pecking-order Theory of Capital Structure Proposes that the bulk of a company’s funds should be the profit it has earned and that profit should be reinvested back in the business. 6. Economic Value Added Theory Represents the economic profit of a company. 7. Theory of Competitive Advantage When considered globally, this refers to one country’s ability to create more value for a product when they can be produced with fewer resources than another country. 8. Modern Portfolio Theory Attempts to increase investment return and decrease risk to the investor. 9. Time Value of Money Theory Suggests that money a company has today is worth more than money the company will have in the future. 10. Prospect Theory Suggests that people value gains more favorably than losses. Table 2 Current Examples of Financial Theories ____________________________________________________________ ...
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...the description of the various factors. The concept of motivation is a very interesting aspect in human life and I find the attempt to study and understand it even more intriguing. Over the years, researchers have tried to explain the dynamics of motivation and there have been many interesting theories put forward. In this paper, I will outline some of these ‘textbook’ theories and attempt to incorporate them to explain some of my experiences from my previous work as well as examples in everyday life situations in discussing the various factors that influence motivation. A long time ago, there was a belief that employees were just another input into the production process called “labor”, just like land or capital. However, this way of thinking was perhaps changed by the research of Elton Mayo commonly referred to as the “Hawthorn Studies” (Dickson, 1973). According to the study, employees are not motivated purely by money and employee behavior is linked to their attitudes (Dickson, 1973). This shifted the dynamics in employers’ needs to understand employee motivation and thus began the human relations approach to management. Defining Motivation Motivation is a complex theory and there are many ways of defining motivation due to the many different possible approaches: physiological, social, behavioral and cognitive. Different contemporary authors have contributed to help define the concept of motivation, which for this paper will be operationally defined as the forces...
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...Henri Fayol was a French mining engineer and director of mines who had developed a general theory of business administration. He was one of the most influential contributors to modern theories of management. He also identified 5 functions and 14 general principles of management in the early 19th century. These functions and principles were based on his experience and observations and were made for general administration purposes. While today’s economy may be more service oriented, one would feel the management functions set down by Fayol are still very relevant. Many of these are considered to be common sense and constitutional to sound management. These functions are: * Planning * Organising * Directing * Controlling and * Coordinating Planning is basically deciding in advance what to do and how to do it. Planning bridges the gap between where one is and where he/she wants to be. It is the primary function and is present on all levels of management. Organising is a process that commences the implementation of the plans that are set down by clarifying working and reporting relationships and effectively deploying resources towards the attainment of organizational goals. Directing involves leading and motivating employees to perform tasks assigned to them. Motivation and leadership are essential to direction. Leadership is influencing others to do what is asked of them and motivating is getting people to want to do it. Controlling is the function...
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...Boeing’s board of directors would need to weigh those considerations before granting final approval to proceed with the project. The task for students is to evaluate the 7E7 project against a financial standard, the investors’ required returns. The case gives internal rates of return (IRR) for the 7E7 project under base-case and alternative forecasts. The students must estimate a weighted-average cost of capital (WACC) for Boeing’s commercial-aircraft business segment in order to evaluate the IRRs. As a result of that analysis, the students identify the key value drivers and distinguish, on a qualitative basis, the key gambles that Boeing is making. The general objective of this case is to exercise students’ skills in estimating a weighted-average cost of capital and cost of equity. The need for students to estimate a segment WACC draws out their abilities to critique different estimates of beta and to manipulate the levered-beta formulas. Boeing competes in both the commercial aircraft and the defense business. Thus, deriving the appropriate benchmark WACC for the 7E7 project requires isolating the commercial aircraft component from Boeing’s overall corporate WACC. In doing so,...
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...Boeing’s board of directors would need to weigh those considerations before granting final approval to proceed with the project. The task for students is to evaluate the 7E7 project against a financial standard, the investors’ required returns. The case gives internal rates of return (IRR) for the 7E7 project under base-case and alternative forecasts. The students must estimate a weighted-average cost of capital (WACC) for Boeing’s commercial-aircraft business segment in order to evaluate the IRRs. As a result of that analysis, the students identify the key value drivers and distinguish, on a qualitative basis, the key gambles that Boeing is making. The general objective of this case is to exercise students’ skills in estimating a weighted-average cost of capital and cost of equity. The need for students to estimate a segment WACC draws out their abilities to critique different estimates of beta and to manipulate the levered-beta formulas. Boeing competes in both the commercial aircraft and the defense business. Thus, deriving the appropriate benchmark WACC for the 7E7 project requires isolating the commercial aircraft component from Boeing’s overall corporate WACC. In doing so, students...
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...People. A common theme observed in modern organizations today is the poor alignment of business strategy and HRM strategy. Find an article(s) through ProQuest which discusses the benefits of aligning HRM activities with key business initiatives and discuss the challenges and the opportunities of doing so. Present your findings in 200 words or more in your discussion post. Remember to properly cite your sources. BUS 692 Week 1 DQ 2 Expectancy and Equity Theory Expectancy and Equity Theory. Business managers seek higher performing workers to staff positions in organizations. Read pages 33 through 45 of the text and at least one article(s) through ProQuest. Consider organizational strategies and practices in your organization that could be enhanced by the application of these theories and address them in 200 words or more in your discussion post. Remember to properly cite your sources. BUS 692 Week 1 Selection of the firm Selection of the Firm. Determine an organization you will analyze and evaluate over the six weeks of this course. The organization can be one in which you work, one in which you have access, or one of such substance that significant internet material is available for your use. Write a three to five page paper that: Describes the nature of the organization (provide industry, product/service, a brief history, and position in relation to competition) Identifies significant management personnel Discusses business strategy Defines the specific area...
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................... 1 Free cash flow ................................................................................................................................. 2 Free cash flow and agency theory .................................................................................................. 3 Free cash flow to equity ................................................................................................................ 3 Free cash flow to the firm.............................................................................................................. 3 Valuation using free cash flow........................................................................................................... 4 Example.......................................................................................................................................... 5 Issues............................................................................................................................................. 6 Online resources for additional information on free cash flow............................................................... 6 The value of a company requires estimating future cash flows to providers of capital and capitalizing these to determine a value of the company today. But what are these cash flows and how do we estimate them? Estimates of cash flows Cash flows have been estimated a number of ways, which adds to the confusion about how we should value a...
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