FINANCIAL MANAGEMENT FINAL EXAM (QUESTION-4 RATIO ANALYSIS (Current…
CALCULATE NET PRESENT VALUE (NPV)
Managerial Reward Schemes
As agents of the company's shareholders. directors may not always act in ways which increase the wealth of shareholders a phenomenon called the agency problem. They on be encouraged to increase or maximize shareholder wealth by managerial reward schemes such as performance-related pay and share option schemes. Through these methods, the goals of shareholders and directors may increase in congruence.
Regulatory Requirements encourage the directors
Regulatory requirements can be imposed through corporate governance cocks of best practice and stuck market listing regulations.
Code of ethics
CURRENT WEIGHTED AVERAGE COST OF CAPITAL
Calculate Cost of Equity
Calculate Cost of preference share using dividend growth model
Calculate the cost of debt using yield-to-maturity method
Calculate the Current Weighted Average Cost of Capital
Multinational financial management & domestic
Nationality of stakeholders
Mobility of factors of production
Political system & risk
Business system & practices
Purchasing Power Parity
Macroeconomic analysis heavily relies on several different metrics to compare economic productivity and standards of living between countries. One popular metric is purchasing power parity (PPP), an economic theory that compares different countries' currencies through a "basket of goods" approach. According to this concept, two currencies are in equilibrium (at par) when a basket of goods is priced the same in both countries, taking into account the exchange rates.
Agency Problem and how to minimize it
Employee share ownership
Long term employment contracts
Long term stock commitment
Describe 3 types of financial market
Commodity markets, which facilitate the trading of commodities.
Money markets, which provide short term debt financing and investment.
Foreign exchange markets, which facilitate the trading of foreign exchange.
Cryptocurrency market which facilitate the trading of digital assets and financial technologies.
Explain 3 functions of financial market
Transfer of resources
Providing the borrower with funds so as to enable them to carry out their investment plans.
Providing liquidity in the market so as to facilitate trading of funds
Promoting savings & invesement
3 ways to improve firm’s capital allocation process
Organic reinvestments (high return on invested capital / optionality)
Marge & Acquisition (most risky form of capital allocation)
Accounts receivable turnover
Non-current asset turnover
Accounts payable turnover
Comparing with Industry Avg