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Financial Management Sample 29-07-2022
Financial Management Sample 29-07-2022
We hope this book provides you with the most enriching learning
experience.
PAPERBACK*
TITLE
ISBN
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TM
FINANCIAL
MANAGEMENT
ESSENTIALS
YOU ALWAYS WANTED TO KNOW
FIFTH EDITION
KALPESH ASHAR
Financial Management Essentials
You Always Wanted To Know
Fifth Edition
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I think the book would be a good primer or assigned text for those
enrolled in a college or AP Finance course, as it introduces financial
concepts in basic terms. The illustrations and flow charts are a plus, as
they will help students navigate the book and visualize applications of
the lessons therein.
Very comprehensive and informative. The book covers all of the topics
that I normally teach my undergraduate students. In my opinion, this
would be a useful tool for a classroom setting. Additionally, the book
will assist someone who is considering starting an investment/relations
company, or a creative business owner to dig deeper into the world of
financial management.
3 Cost of Capital 39
3.1 Cost of Debt (kd) 40
3.2 Cost of Preferred Stock (kp) 40
3.3 Cost of Retained Earnings (ks) 41
3.4 Cost of New Common Stock (ke) 45
3.5 Weighted Average Cost of Capital (WACC) 46
Solved Examples 48
Practice Exercise 52
Chapter Summary 54
4 Capital Budgeting 55
4.1 Free Cash Flow 56
4.2 Timing of Cash Flows 58
4.3 Estimating Cash Flows over Life of Project 59
4.4 Payback Period 63
4.5 Discounted Payback Period 65
4.6 Net Present Value (NPV) 67
4.7 Internal Rate of Return (IRR) 69
4.8 Modified Internal Rate of Return (MIRR) 70
4.9 Usage of Capital Budgeting Methods 71
Case Study 73
Solved Examples 74
Practice Exercise 80
Chapter Summary 83
Glossary 185
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Preface
Finance is an area that is important in our everyday life. It is needed
at work and at home. It is important to understand that Finance and
Financial Management are not the same. Financial Management is a
part of the world of finance that helps us understand our finances and
make important decisions, like when to make a new investment in a
new product line or when to buy a new home. Traditionally, this skill
has been restricted to individuals in the finance department or those
who studied the subject in school. Over time, we have come to realize
that everybody should have financial acumen, as it is a key skill
required to succeed in personal life and in professional life.
● Managers in an organization
Introduction to Financial
Management
● G
et introduced to the financial management decision-
making tools
Figure 1.1
Make Decisions in
Prepare Financial Analyze Financial Operating, Investing
Statements Statements & Financing
2 Financial Management Essentials You Always Wanted To Know
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Introduction to Financial Management 3
a) Ratio analysis
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4 Financial Management Essentials You Always Wanted To Know
a) Cost of Capital
b) Capital Budgeting
e) Dividend Policy
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Chapter 2
Financial Statement
Analysis
● K
now how to prepare common-size financial
statements for analysis
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Financial Statement Analysis 7
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8 Financial Management Essentials You Always Wanted To Know
Liquidity Ratios
Current Ratio
This means that current assets of All Fresh cover over 3 times its
current liability payments.
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Financial Statement Analysis 9
For All Fresh, Quick ratio = ($100 million – $60 million)/$30 million
= 1.33
If the industry average is 4.0, then All Fresh has a better value
of inventory turnover ratio. It means that it is carrying lower
inventory than its competitors for the same sales volume.
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Financial Statement Analysis 11
Debt Ratio
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12 Financial Management Essentials You Always Wanted To Know
Debt-to-Equity Ratio
Profitability Ratios
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Financial Statement Analysis 13
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14 Financial Management Essentials You Always Wanted To Know
If the industry average is 2.5% then it means that All Fresh has
a better return on sales.
For All Fresh, assume that the current stock price is $20
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