QUESTION 1 You are the investment manager for Ultimate Asset Managers and have been asked to...

QUESTION 1

You are the investment manager for Ultimate Asset Managers and have been asked to give a presentation to the new intake of graduates for the company’s internship programme.

REQUIRED:
Q.1.1 Name and discuss any two primary responsibilities/activities of financial managers.
Q.1.2 Explain to the graduates what role contractual institutions play in the operation of financial markets. In your answer, provide an example of a contractual institution.

Expert Solution

Solution:

1.1

Two primary responsibilities/activities of financial managers are -

a. Raising capital for the firm or the company - A financial manager is responsible for deciding which sources should be used to raise the fund for the company. A financial manager evaluates all the possible options of raising funds and selects the best out of them and make the best capital structure as per the needs of the business.

b. Maximizing the value of the firm - This is the most important role of a financial manager. This is in the scope of his duties to maximize the value of the company using his best skills and knowledge by investing the funds of the company and raising capital from available resources. He has to decide upon both short-term as well as long-term actions of the company.

2.2

A contractual institution can be defined as the institution that is involved in the collection of the funds with the intention of investing these funds under the long-term scenario in securities like debt and equity.

The role of contractual institutions can be explained as when funds are invested in long-term securities, this helps in the development of financial markets. Further, it helps in forming an economy that is more resilient to interest rates and is able to absorb demand shocks easily. And it helps in potentially stimulating economic growth.

ekkarill92 answered 2 years ago

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