Describe why a manager needs to understand the characteristics and importance of financial markets including risk and efficiency.

Principles of Finance 7 DQ

All responses should be in APA format, 7 discussion questions

 

Discussion 1

Summarize the role of management as it relates to finance in a corporation.  In your post, address the following:

    • Indicate the various aspects of finance that management must understand.
    • Describe why a manager needs to understand the characteristics and importance of financial markets including risk and efficiency.
    • Describe why cash flow is more important than sales in a business.
    • Discuss what could happen if management does not fulfill responsibilities related to finance.  If you have one, share a real world example from your own professional experience or from an external source.

 

Discussion 2

View the Important Financial Documents video which looks at the fundamental financial documents every company needs; including the balance sheet, income statement, and statement of cash flow. In your post, choose one of the financial statements and explain how a manager would use the statement to drive financial analysis and decision-making. Your post should be 200-250 words in length.

 

Discussion 3

Imagine that you have decided you need a new car, but not any car will do; you have decided to purchase the car of your dreams. Conduct some research as to the cost of this car.  You have determined in this imagined scenario that you could afford to make a 10% down payment.  You can borrow the balance either from your local bank using a four-year loan or from the dealership’s finance company.  If you purchase from your dealership’s finance company, the APR will be 10% with your 10% down and monthly payments over three years. However, the dealership will give you a rebate of 5% of the car price after the three year term is complete.  You want the best deal possible, so you consider the following questions:

  • What type of car have you selected, and what will it cost?
  • What is the interest rate from your local bank for a car loan for four years?
  • What will your payment be to your local bank, assuming your 10% down payment? Be sure to use the formula provided in Chapter 4 and show your work. How much will that car have cost in four years?
  • What will your payment be to the dealership finance company assuming your 10% down payment? Be sure to use the formula provided in Chapter 4 and show your work. How much will that car have cost in 3 years?
  • Which is the better deal and why?

 

Discussion 4

Go to the Yahoo Finance Bonds Center.

  • Under: Bonds Center click Bond Screener:
  • Click the Corporate check box under Bond Type then click Find Bonds.
  • Choose any bond.

 

Assume interest rates for bonds today is 5% for an AAA rated bond. Calculate the price of the bond you have selected relative to the 5%. Is the bond selling at a premium or a discount? Why? Be sure to show how you arrived at your answer.  What other factors may influence the value of a bond?

 

Discussion 5

View the Capital Budgeting video, which provides some factors that should be considered in capital budgeting considerations.

Imagine the producers of this video ask you to appear in the video to offer two additional considerations in capital budgeting decisions. One consideration must be quantitative (numeric). The other must be qualitative (non-numeric). Write a script to describe capital budgeting considerations that you think are important for managers to consider. Your script should be 200 to 250 words.

 

Discussion 6

Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC). What are some potential issues in using varying techniques for cost of capital for different divisions? If the overall company weighted average cost of capital (WACC) were used as the hurdle rate for all divisions, would more conservative or riskier divisions get a greater share of capital? Explain your reasoning. What are two techniques that you could use to develop a rough estimate for each division’s cost of capital? Your initial response should be 200 to 250 words.

 

Discussion 7

Find two articles that discuss financial ratio analysis. Identify two advantages and two disadvantages to using ratios in financial analysis. Be sure to cite your sources using APA format

 

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