Question

-Describe the attributes of the different forms of financing, i.e. debt and equity.?

-Differentiate between common stock and preferred stock?

-List the major goals of financial management?

-Be able to discuss corporate governance, and the roles and responsibilities of the three groups involved?

-Be able to differentiate between a closely held and a publicly held firm?

-List the types of information found in a corporation’s annual report and differentiate between the other levels of financial statement reporting.?

-Explain what a balance sheet is, the information it provides, and how assets and claims on assets are arranged on a balance sheet.?

-Explain what an income statement is and the information it provides.?

-Identify the purpose of the statement of cash flows, list the factors affecting a firm’s cash position that are reflected in this statement, and identify the three categories of activities that are separated out in this statement.?

-Differentiate between cash flow profits (net cash flow) and accounting profit.?

-Discuss how certain modifications to the accounting data are needed and used for corporate decision making and stock valuation purposes. In the process, explain the terms: net operating working capital, total operating capital, Investor Supplied Capital, NOPAT, free cash flow, and operating cash flow; and explain how each is calculated and be prepared to calculate each.?

-Be able to discuss how a corporation determines the taxes that it pays.?

-List some of the many different attributes of financial markets, and identify several recent trends taking place in the financial markets.?

-List and describe the two different kinds of stock markets.?

-Describe the attributes of an “IPO”.?

-Describe three ways in which the transfer of capital takes place.?

-Discuss the various financial and investment intermediaries.?

-Discuss how business income taxes are determined and calculate the taxes owed by a business.?

Answer 1

A)Ther are two forms of finance for the business: debt and equity

Debt: 1) lenders of debt are not the business owners.

2) interest is paid to the lenders whether company has made any profits or not.

3) interest payments made is charged in profit and loss account, thus helps in tax saving also.

Equity: 1)equity financers are the owners of the business.they have harge over the company.

2) dividend is paid to them instead of interest and it depends upon company whether they want to pay or not.

3) dividend paid is not chatged in profit and loss account , hence no tax saving.

B) There are two types of shares : common shares and preference shares

Dividend : Fixed rate of dividend is paid on preference shares, whether or not company has made any profits. Dividend on common shares depends upon company's management. It is paid only if it is approved in Annual general meeting.

Voting rights: preference shareholders doesnt have any voting rights. However, common shareholders have voting rights. Common shareholders are the owner of the company.

C) goals of financial management:

Decision once taken cannot be changed! Financial decisions taken by the company involves a lot of money and if any wrong decision is taken by the company, it can lead to huge losses. However, impact of such wrong decisions can be mitigated with the help of financial management. Major goal of financial management is to ensure that correct decisions are taken by the management which helps im achieving the goal of maximising the shareholders return.