Tutorial chapter 1 Fin320

1) Other essential goals to support the com0any in achieving wealth maximization:

a) maximize profits
b) maximization of sales
c) minimization of risk
d) maximizing share price

2) Money Market and Capital Market Differences:

Money Market:
-Purpose: A market for trading short term securities for individuals or institutions with temporary
surpluses or shortages
-Maturity: One year or less
-Product: Treasury Bills

Capital Market:
-Purpose: A market for trading long term term security
-Maturity: More than one year
-Product: Bonds, Common stocks, Preferred stocks

3) 5 functions if financial manager:

a) Forecasting and planning

-develop strategies to influence future outcome
-at the same time, forecast expected outcome of the present day decisions

b) Investment decisions
-it concerns with the determination of the appropriate mix in the asset structure held by
firm

c) Financing decisions
-supporting the needs of firm with accumulating the fund through desirable combination
of debt and equity financing

d) Dividend policy
-it is important as it directly influences the amount of earning that available and it will be
distributed as cash dividend and retained earnings

e) Dealing with financial market

-financial manager must deal with money and capital market for financing and
investment purposes

4) Primary and Secondary market differences:

Primary Market:
-deals with newly issued securities that involves issuer and investors
-it is the market which new issues of a security are sold to initial buyers

Secondary Market:
-deals with securities previously issued
-is the market which previously issued securities are traded

5) Roles of financial manager regarding investment decisions:

-To concerns with the determination of the appropriate mix in the asset structure held by the firm

6)Roles of financial manager regarding financial decisions:

-To support the needs of the firm by accumulating the fund through a desirable combination of
debt and equity financing