Question

Write two articles related to the world of finance and include: making better business decisions using the Time Value of Money; investment banking, stock investments, etc...Use good research strategies to provide insightful information.

Answer 1

Finance is the life blood of a company. The company depends on the finance department for all the activities that it wants to carry out. The finance manager should be well versed with the finance concepts in order to be able to manage the finances of the company well. The finance manager of a company has to take three major decisions. They are: Investing decision, Financing decision and Dividend decision. The future of the company depends on the efficiency in which these decisions are taken by the finance manager. The concept of time value of money states that money that is received today is more in value than money that will be received in future. The future value of money and present value of money concepts are very critical when a finance manager wants to analyze a project. The finance manager has to apply the various capital budgeting techniques in order to ensure that the right project is selected and invested in. This is a part of the investment decisions that finance managers have to take. The money that will be required for carrying out such investment decisions will be obtained from financing decisions.

The financing decision involves deciding on the capital structure of the company. They capital structure should be a perfect balance between the debt and equity. As the debt component in the capital structure increases the risk increases but there are also some advantages of it. Such as, the interest that the company has to pay to the debt holders will be given relief from tax. The tax relief is an advantage for the company. In equity, the company should be aware that once it offers its shares to the public for investment then it will also have to give some of its ownership rights to the equity shareholders. The company’s performance will affect the share price of the company and its valuation in the market. Thus, the knowledge of financial instruments is essential. Moreover, as the company will have shareholders, it will have to issue dividends. The dividend declaration is also an important part of the finance managers decision making capability.