Question

1.		a.	Illustrate the career opportunities available to a finance graduate.		2
		b.	What action could be taken to remove a management team if it departs form the goal of maximizing wealth?		2
		c.	What are ratios? What are the uses of ratios?		2
		d.	Distinguish between the following: Spot market and Futures market Money market and capital market		2
		e.	Why are financial markets essential for a healthy economy?		2

Answer 1

a. Career Opportunities for Finance Graduates
1. Financial Planner
2. Financial Analyst
3. Credit Analyst
4. Actuary

b. Actions that could be taken-
Your management team may be more willing to take on higher levels of risk, – operating, financial or investing – while your shareholders desire maximized returns in the form of capital gains and dividends. Shareholders are generally risk-averse, which is viewed as prudent and conservative. If your management team receives a large portion of its compensation in annual salaries and stock options, managers have less to lose because salaries are constant, and stock option values rise in response to increased volatility, a form of risk.

C. Ratios and their use-
Financial ratios offer entrepreneurs a way to evaluate their company’s performance and compare it other similar businesses in their industry.

Ratios measure the relationship between two or more components of financial statements. They are used most effectively when results over several periods are compared. This allows you to follow your company’s performance over time and uncover signs of trouble.

d. Spot Market Vs. Future Market
The spot market is where financial instruments, such as commodities, currencies and securities, are traded for immediate delivery. Delivery is the exchange of cash for the financial instrument. A futures contract, on the other hand, is based on the delivery of the underlying asset at a future date.

Exchanges and over-the-counter (OTC) markets may provide spot trading and/or futures trading.

Money Market vs Capital Market
The money market is the trade in short-term debt. It is a constant flow of cash between governments, corporations, banks, and financial institutions, borrowing and lending for a term as short as overnight and no longer than a year.
The capital market encompasses the trade in both stocks and bonds. These are long-term assets bought by financial institutions, professional brokers, and individual investors.

e. Financial Markets essential for healthy economy
Financial markets help to efficiently direct the flow of savings and investment in the economy in ways that facilitate the accumulation of capital and the production of goods and services. The combination of well-developed financial markets and institutions, as well as a diverse array of financial products and instruments, suits the needs of borrowers and lenders and therefore the overall economy.