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  • Assignment 1

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    Maria Javed
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    This document provides definitions for key financial management terms including: - Marginal analysis which examines additional benefits vs costs of activities to maximize profits. - Accrual principle which requires matching costs to revenues generated under Generally Accepted Accounting Principles (GAAP). - Capital budgeting which determines if projects like new plants are worth pursuing by assessing if returns meet benchmarks. - Working capital management which maintains efficient levels of current assets and liabilities to ensure sufficient cash flow. - Required rate of return which is the minimum return an investment must provide based on alternative investment returns and risk levels. - Capital structure which is a mix of long-term debt, short-term debt, common equity and preferred equity

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    This document provides definitions for key financial management terms including: - Marginal analysis which examines additional benefits vs costs of activities to maximize profits. - Accrual principle which requires matching costs to revenues generated under Generally Accepted Accounting Principles (GAAP). - Capital budgeting which determines if projects like new plants are worth pursuing by assessing if returns meet benchmarks. - Working capital management which maintains efficient levels of current assets and liabilities to ensure sufficient cash flow. - Required rate of return which is the minimum return an investment must provide based on alternative investment returns and risk levels. - Capital structure which is a mix of long-term debt, short-term debt, common equity and preferred equity

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Scarica in formato DOCX, PDF, TXT o leggi online su Scribd
    Segnala contenuti inappropriati
    20 visualizzazioni4 pagine

    Assignment 1

    Caricato da

    Maria Javed
    This document provides definitions for key financial management terms including: - Marginal analysis which examines additional benefits vs costs of activities to maximize profits. - Accrual principle which requires matching costs to revenues generated under Generally Accepted Accounting Principles (GAAP). - Capital budgeting which determines if projects like new plants are worth pursuing by assessing if returns meet benchmarks. - Working capital management which maintains efficient levels of current assets and liabilities to ensure sufficient cash flow. - Required rate of return which is the minimum return an investment must provide based on alternative investment returns and risk levels. - Capital structure which is a mix of long-term debt, short-term debt, common equity and preferred equity

    Copyright:

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    di 4

    MARIA 1AVED

    2010-MPA-024













    FUNDAMENTALS OF FINANCIAL MANAGEMENT
    ASSIGNMENT # 01
    MR NAUMAN WAHEED
    FA1IMA1IAAAH WOMEA UAIJERSI1Y

    Marginal Analysis
    An examination oI the additional beneIits oI an activity compared to the additional
    costs oI that activity.
    Companies use marginal analysis as a decision-making tool to help them
    maximize their proIits.
    Individuals unconsciously use marginal analysis to make a host oI everyday
    decisions.
    Accrual principle/ system
    The principle oI accrual (also called matching) is Iundamental to accounting. It
    requires that costs should be matched to the revenues they generate. It is an
    O Important part oI the GAAP
    O Permits meaningIul comparisons based on the actual operations
    Capital Budgeting
    The process in which a business determines whether projects such as building a new
    plant or investing in a long-term venture, are worth pursuing. It is used to
    determine whether the returns generated meet a suIIicient target benchmark, also
    known as investment appraisal.
    Working capital management
    A managerial accounting strategy Iocusing on maintaining eIIicient levels oI both
    components oI working capital, current assets and current liabilities, in respect to each
    other. Working capital management ensures a company has suIIicient cash Ilow in
    order to meet its short-term debt obligations and operating expenses.
    Required rate of return
    The minimum rate oI return that an investment must provide or must be expected to
    provide in order to justiIy its acquisition. An investment's required return is a Iunction
    oI the returns available on other investments and oI the risk level inherent in a
    particular investment.
    Example: An investor who can earn an annual return oI 11 on certiIicates oI
    deposit may set a required rate oI return oI 15 on a more risky stock
    investment beIore considering a shiIt oI Iunds into stock:


    Capital structure
    A mix oI a company's long-term debt, speciIic short-term debt, common equity and
    preIerred equity. The capital structure is how a Iirm Iinances its overall operations and
    growth by using diIIerent sources oI Iunds.


    Capitalization
    1. In accounting, it is where costs to acquire an asset are included in the price oI
    the asset.
    2. The sum oI a corporation's stock, long-term debt and retained earnings. Also
    known as "invested capital".
    A company's outstanding shares multiplied by its share price, better known as
    "market capitalization".
    Agency problem
    A situation in which agents oI an organization (e.g. the management) use their
    authority Ior their own beneIit rather than that oI the principals (e.g. the shareholders).
    The agency problem also reIers to simple disagreement between agents and
    principals.
    For example: A publicly-traded company's board oI directors may disagree
    with shareholders on how to best invest the company's assets. It especially
    applies when the board wishes to invest in securities that would Iavor board
    members' outside interests.








    DEBT
    ong term notes payable
    Bonds issued
    EQUITY
    Common stock
    PreIerred stock
    Retained earnings
    REFERENCE

    inancial term dictionary. (2011). Investopedia. Retrieved Irom
    hLLp//wwwlnvesLopedlacom"

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