Homework#1 in finMan Write and answer

1. Define Finance, Finance manager, Chief financial officer, Treasurer, Controller, Financial
management, Financial economics, Investment, Personal Finance, Public Finance, Wealth
maximization, Risk, Return, Intrinsic Value, Cash, Time value of money, Market price, Free
cash flows, Weighted average cost of capital.

 FINANCE- finance represents money management and the process of acquiring needed
funds. Finance also encompasses the oversight, creation, and study of money, banking,
credit, investments, assets, and liabilities that make up financial systems.
 FINANCE MANAGER- Financial managers are responsible for the financial health of an
organization. They produce financial reports, direct investment activities, and develop
strategies and plans for the long-term financial goals of their organization.
 CHIEF FINANCIAL OFFICER- A chief financial officer (CFO) is the senior executive responsible
for managing the financial actions of a company. The CFO's duties include tracking cash
flow and financial planning as well as analyzing the company's financial strengths and
weaknesses and proposing corrective actions.
 TREASURER- a person appointed to administer or manage the financial assets and liabilities
of a society, company, local authority, or other body.
 CONTROLLER- A controller is an individual who has responsibility for all accounting-related
activities, including high-level accounting, managerial accounting, and finance activities,
within a company.
 FINANCIAL MANAGEMENT- Financial Management means planning, organizing, directing
and controlling the financial activities such as procurement and utilization of funds of the
enterprise.
 FINANCIAL ECONOMICS- Financial economics is a branch of economics that analyzes the use
and distribution of resources in markets in which decisions are made under uncertainty.
 INVESTMENT- An investment is an asset or item acquired with the goal of generating income
or appreciation.
 PERSONAL FINANCE- Personal finance is a term that covers managing your money
and saving and investing. It encompasses budgeting, banking, insurance, mortgages,
investments, retirement planning, and tax and estate planning.
 PUBLIC FINANCE- Public finance is the study of the role of the government in the economy.
It is the branch of economics that assesses the government revenue and government
expenditure of the public authorities and the adjustment of one or the other to achieve
desirable effects and avoid undesirable ones.
 WEALTH MAXIMIZATION- Wealth maximization is the concept of increasing the value of a
business in order to increase the value of the shares held by stockholders.
 RISK- risk often refers to the chance an outcome or investment's actual gains will differ from
an expected outcome or return.
 RETURN- A return, also known as a financial return, in its simplest terms, is the money made
or lost on an investment over some period of time.
  INTRINSIC VALUE- is the perceived or calculated value of an asset, an investment, or a
company.
 CASH- Cash is legal tender – currency or coins – that can be used to exchange goods, debt,
or services. Sometimes it also includes the value of assets that can be easily converted into
cash immediately, as reported by a company.
 TIME VALUE OF MONEY- The time value of money (TVM) is the concept
that money available at the present time is worth more than the identical sum in the future
due to its potential earning capacity.
 MARKET PRICE- is the current price at which an asset or service can be bought or sold.
 FREE CASH FLOWS- represents the cash a company generates after cash outflows to support
operations and maintain its capital assets. free cash flow is a measure of profitability that
excludes the non-cash expenses of the income statement and includes spending on
equipment and assets as well as changes in working capital.
 WEIGHTED AVERAGE COST OF CAPITAL- The weighted average cost of capital (WACC) is a
calculation of a firm's cost of capital in which each category of capital is
proportionately weighted. All sources of capital, including common stock, preferred stock,
bonds, and any other long-term debt, are included in a WACC calculation.

2. Differentiate Economics, Finance and Accounting

 accounting is a profession devoted to recording, analyzing, and reporting income and expenses,
focuses on the day-to-day flow of money in and out of a company or institution,
whereas finance is a broader term for the management of assets and liabilities and the
planning of future growth. while economics is a branch of the social sciences that is concerned
with the production, consumption, and transfer of resources.

3. Differentiate Financial management, Business Finance and Corporate Finance

 Financial management is a business process that ensures that operating data is correct,
complete and recorded in accordance with regulatory guidelines, corporate policies and
industry practices. Corporate finance is a business function that helps a company's top
management evaluate operating data and determine liquidity needs. Whereas Business finance
refers to money and credit employed in business. It involves procurement and utilization of
funds so that business firms may be able to carry out their operations effectively and
efficiently.
4. What are the roles, duties, responsibilities of financial managers?

 The role of the financial manager, particularly in business, is changing in response to technological
advances that have significantly reduced the amount of time it takes to produce financial reports.
 Financial managers typically do the following:

 Prepare financial statements, business activity reports, and forecasts

 Monitor financial details to ensure that legal requirements are met

 Supervise employees who do financial reporting and budgeting

 Review company financial reports and seek ways to reduce costs

 Analyze market trends to find opportunities for expansion or for acquiring other companies

 Help management make financial decisions

 Financial managers’ main responsibility used to be monitoring a company’s finances, but they now
do more data analysis and advise senior managers on ideas to maximize profits. They often work on
teams, acting as business advisors to top executives.

5. What are the advantages and disadvantages of single proprietorship, partnership, and
corporation

Sole proprietorship

Advantages

• You're the boss. • It's easy to get started. • You keep all profits. • Income from business is
taxed as personal income. • You can discontinue your business at will.

Disadvantages

• You assume unlimited liability. • The amount of investment capital you can raise is limited. •
You need to be a generalist. Retaining high-caliber employees is difficult. • The life of the business is
dependent on the owner's.

Partnership

Advantages
• Two heads are better than one. • It's easy to get started. • More investment capital is
available. • Partners pay only personal income tax. • High-caliber employees can be made
partners.
Disadvantages
• Partners have unlimited liability. • Partners must share all profits. • The partners may
disagree. • The life of the business is limited.

Corporation

Advantages

• Stockholders have limited liability. • Corporations can raise the most investment capital. •
Corporations have unlimited life. • Ownership is easily transferable. • Corporations utilize specialists.

Disadvantages

• Corporations are taxed twice. • Corporations must pay capital stock tax. • Starting a
corporation is expensive. • Corporations are closely regulated by government agencies.