Part 1 1. Describe the role of finance in business. Why study finance?

 Part 1

1.   Describe the role of finance in business. Why study finance?

2.   Identify at leat five (5) basic principles that form the foundations of finance, and provide short explanation to each principle you listed.

3.   What do you know about the banking system? How does it help finance your business? Is it still relevant today?

4.   Differentiate and explain the “time value of money” against the “cost of capital”.

5.   Explain extensively what is public offering verus private placements.

6.   Differentiate investment in bonds against investment in stocks. Which would you prefer?

7.   How does “short term credit” and “letter of credit” work?

8.   Describe or explain the following terms…

a)   Compound interest against future values

b)   The “Present Value” of an annuity.

c)   The meaning and measurement of “Risk and Return”

d)   Managing “Working Capital”

e)   What is “dividend income” against “interest income”?

Part 2

1)   Financial Management, is also referred to as managerial finance, corporate finance, and business finance. What is the nature and goal of Financial Management? Explain.

2)   Describe the relationship between Financial Management, Accounting and Economics.

3)   What are the three types of financial management decisions? For each type of decision, give an example of a business transaction that would be relevant.

4)   Ethics are of primary importance in any practice of finance. Why is this so? Explain.

5)   Integrity is an ethical requirement for all finance managers. One aspect of integrity requires…

a)   performance of professional duties in accordance with applicable laws.

b)   avoidance of conflict of interest.

c)   refraining from improper use of inside information

d)   maintenance of an appropriate level of professional competence

(select your answer choice and explain your reason)

6)   Corporate governance is the process of monitoring managers and aligning their incentives with shareholders goals. Why should corporate governance be in place? Explain.

7)   Explain the shareholder wealth maximization goal of the firm and how it can be measured. Make an argument for why it is a better goal than maximizing profit.

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