StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Finance Concepts - Assignment Example

Cite this document
Summary
Finance Concepts Name Hamid Assar Business Finance FIN 100 Finance Concepts 1. Opening up a small business is a risky venture and requires diligent assessment and analysis beforehand. As a small business owner there will always be limitation of finances…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER96.8% of users find it useful
Finance Concepts Assignment
Read Text Preview

Extract of sample "Finance Concepts"

Download file to see previous pages

If the estimated life of this project is 5 years and the Required Rate of Return is 10%, then we can also calculate the NPV of this project. If the NPV is also a positive value then we can safely estimate that this project will carry a good return, and the initial investment would be covered in 5 years. (Shim & Siegel, 2000). 2. Whenever one wants to finance a business, he can go for either debt or equity financing. Debt Financing carries lots of advantages and disadvantages. The major advantage of this form of financing is that you do not lose the ownership of your company.

The lender also does not have any sort of share in the future business profits. Moreover, the interest on debt is deductible on the tax’s returns, hence reducing the actual cost of loan to the company. Finally, in the case of debt financing the company is not entitled to send their annual reports to various stakeholders. However there is always another side of a coin. Debt Financing carries the disadvantage of at being repaid at some point in time. The interest cost can be very risky for a company, especially at the times of financial crisis.

Other than that the collateral the company pledges against the loan can put extra pressure on the owner of a small venture. There is a reason why companies choose to invest in stock rather than bonds. The investment in bonds carries lower returns than stocks. Even though it is less risky, the return on stocks can be much more appealing. Investors can, in certain situations lose money on bonds, if they sell a bond when the price is lower from when they purchased it. The higher inflation rates over the investment return on bonds will hurt the purchasing power of the money the investors have (Petch, n.d.). 3. In the field of finance there is an important concept of risk-return trade-off.

There is a general idea that prevails, the higher the risk the greater the return would be for an investment. The balance of the risk-return trade-offs, is hence a key factor in designing a proper financial and investment plan. Let us take an example of investment in stocks. In the case of a speculative stock because of its high risk, as an investor, you will expect a higher return. The same is the case with the working capital management. If you keep a lower inventory, there is a risk of running out of stock and hence you expect a larger return out of it (Shim & Siegel, 2000). 4. In finance, a Beta measures how volatile any security is to the market average.

In layman terms, it measures the return of a security in a certain time period in relation to the overall market. Let us take an example, if a company has a beta of 2.0 in due time, this would mean that if the stock market would increase by 10%, our company’s stock will increase twice fold i.e. by 20% and vice versa. If the company has a 0 beta that means it is not affected by the market. A 0.5 beta would mean the company’s stock is half as volatile as the market, while a 1 beta would show that the company is as volatile as the market (Shim & Siegel, 2000). 5. When a risk occurs due to non-probabilistic events and not by pure chance, it is classified as

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Finance Concepts Assignment Example | Topics and Well Written Essays - 1000 words”, n.d.)
Finance Concepts Assignment Example | Topics and Well Written Essays - 1000 words. Retrieved from https://studentshare.org/finance-accounting/1443777-understanding-the-concepts
(Finance Concepts Assignment Example | Topics and Well Written Essays - 1000 Words)
Finance Concepts Assignment Example | Topics and Well Written Essays - 1000 Words. https://studentshare.org/finance-accounting/1443777-understanding-the-concepts.
“Finance Concepts Assignment Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/finance-accounting/1443777-understanding-the-concepts.
  • Cited: 0 times

CHECK THESE SAMPLES OF Finance Concepts Assignment

Research and Professional Skills

For instance, they give me relevant notes that I need to revise, encourage me not to give up and explain concepts that I do not understand.... The main challenge is that I record poor results in finance reporting assignment because of poor understanding and sickness....
2 Pages (500 words) Assignment

Start-Up Business: SimVenture

evelopment of the Company's Business Plan Though SimVentureIn order to ensure the success of the Company, the most important issue that should be considered first is having knowledge about the finance, Marketing, Operations, and HRM sectors of the Company.... The core areas of the Virtual Environment include the Company's customers, direct competitors, and Virtual Market Segments, while the core areas of the Company include finance, Operations, Management, and Marketing (Jones & Jayawarna, 2013, 147)....
6 Pages (1500 words) Assignment

Employment-Based Insurance

The lieutenant governor-elect, now says the team would retain many of the complex laws new programs and pursue the same goal -- health care for all. Key business leaders are now urging Weld to delay rather than kill the most bitterly opposed feature of the law, the Running Head: finance ASSIGNMENT finance Assignment of the Institute] With just a fraction of the s estimated 400,000 medically uninsured residents now enrolled, the promise of health care coverage for all, made in 2014, hangs in the balance....
3 Pages (750 words) Assignment

The Ultimate Competitive Advantage

Maintaining it, on the other hand, can be a challenge, as the economy regularly throws various trials across the faces of businesses.... One of the primary challenges that firms face is whether they hire the right people, who… Similarly, project managers are always faced with the worry of whether their product or service will stay relevant in the market for a considerable duration or if it would grow into a brand....
8 Pages (2000 words) Assignment

Individual Reflection: Blueprint for Professional and Personal Growth: Your Future as a Manager

This topic impacted on my understanding of financial management concepts by… lping me develop the conception that the financial health and the financial outcome of the company must be something that is prioritized between stockholders and management alike.... Crucial among these was lesson on aligning stockholder and management interests....
4 Pages (1000 words) Assignment

Strategic Planning and Control

This will involve the development of financial techniques and reflect the soft skills developed within me.... Our chosen company did not do very well and lost a few market shares in Europe… As a result, we set a higher price for the product in order to capture a larger market share and to earn more profit....
8 Pages (2000 words) Assignment

Leverage or Profitability Ratio

A higher value for the ratio is favourable; the company has more cover for finance costs hence low business risk.... current ratio, inventory turnover, etc.... In addition, note if the ratio is a Liquidity, Efficiency/Asset Utilization, Leverage or Profitability ratio.... Finally, please, specify whether a company should… a) This ratio specifies how quickly the company turning its assets into sales: total asset turnover....
3 Pages (750 words) Assignment

Understanding Statistics: Concepts and Methods

"Understanding Statistics: concepts and Methods" paper argues that proper servicing has to be done before they go to work to avoid lateness at the time of emergency.... Fuel being another cause is all about finances, vehicles should be daily checked if their fuel tanks are full.... nbsp;… The data in the two tables will be referred to though separately....
6 Pages (1500 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us