Strategic Finance

Assignment # 1

Name:

Bilal Karim

CMS:

17884

Financial Statement Analysis

Financial statement analysis is the process of reviewing
company's financial statements to make better economic decisions.

and

analyzing

Capital Structure
This is how company manages the finances regarding the operations of the company. The
sources can be equity and debt.
Risk & Return
High risk is associated with higher returns. This is tradeoff between minimum possible risk
and highest possible return.
Capital Budgeting
This is the decision that the firms long term investment in shape of new plant and machinery
and R&D are worth funding through the firms capital structure.
Securities & portfolio Management
This is the art and science of making decisions about investment mix and policy, matching
investments to objectives, asset allocation for individuals and institutions, and balancing risk against
performance.
Dividends
Part of profit given to shareholders of the company.
Financial Evaluation
This is the evaluation of different options of available with the company for finances.
Time value of Money
This is the concept that the value of money today is more and will decrease with time.
Asset Management
This is the proves of developing, maintaining, operating and disposing off assets cost effectively.
Working Capital
The capital of business used in day to day operations.
Cost of capital
This is the opportunity cost of capital. i.e. the rate of return that could have been earned by putting
the same money in a different investment.

Importance of companys financial statement and financial reports.

The companys financial statements provide information to the manager s of the company
about the performance of the company. These also provide information to the investors and
the shareholders of the company about the past performance of the company. It helps them
to make investment decisions. The manager get the picture of the companys standing
financially and make decision about the future of the company.
The investors and creditors of the company need to understand the financial condition of the
company to make right decisions about their investments. The balance sheet provide
information about the assets, debt and equity components.
Questions regarding the topic
The relation between Capital budgeting and asset management?
Does time value of money have any impact on risk and return.
Will we invest in a higher return project with a higher cost of capital fund source.
Do investors prefer a company that has history of undertaking risky projects with higher
returns?