DESCRIPTION

The financial statements generated by accountants for a business can be used in different ways to discern the financial health of that business from the perspective of a range of different stakeholders.

Activity 1.1

Explain the three types of business decisions that a financial manager faces:

  1. What long-term investments should the firm undertake?
  2. How should the firm raise money to fund those investments?
  3. How can the firm best manage its cash flows as they arise in its day-to-day operations?

Activity 1.2

List the three main forms of business organizations and describe their advantages and disadvantages. If you were to consider starting up a lawn-care business for the summer, what type of business organization might you use?

Activity 1.3

What goals do the owners of a for-profit business generally strive for?

Activity 1.4

Why do you think many companies compensate executives with options based on long-term increases in the value of the company's stock?

712FMGT Financial Management Assignment

Activity 1.5

Principle 1 deals with the time value of money (TVM). Describe a decision you might face in the future that will require you to consider the future value of money received (or invested). For example, how might the time value of money enter into a decision to push back your graduations date by one year

  1. According to Principle 2, how should investors decide where to invest money?
  2. In very basic terms, describe how profits and cash flow are different?

Key terms and concepts

  • Sole proprietorship
  • Partnership
  • Corporation
  • Goals of the financial manager
  • Five principles of financial management
  • Risk return trade-off
  • Time value of money
  • Cash flow vs. profit
  • Efficient capital markets
  • Agency problem Ethical behavior

Analyze and interpret the ratios and the other data with reference to the theoretical concepts introduced in this subject to evaluate the company’s operations and performance.