B6005 Financial Management

Answer Key In-class Exercise 3 Bond Valuation

Discounted cash flows                                                                                         Answer: F

.         The market value of any real or financial asset, including stocks, bonds, or art work, may be found by determining future cash flows and then discounting them back to the present.

Call provision                                                                                                                  Answer: F 

.       A call provision... Continue reading "B6005 Financial Management" »

Principles of Economics

Scarcity and Economics

Scarcity refers to the limited nature of society's resources. Economics is the study of how society manages its scarce resources.

How People Make Decisions

1. People Face Tradeoffs

Every decision involves tradeoffs. A significant tradeoff society faces is between:

• Efficiency: When society gets the most from its scarce resources.
• Equality: When prosperity is distributed uniformly among society's members.

Tradeoff Example: To achieve greater equality, income could be redistributed from the wealthy to the poor. However, this can reduce the incentive to work and produce, shrinking the overall economy.

2. The Cost of Something Is What You Give Up to Get It

Decision-making requires comparing the costs and benefits... Continue reading "Principles of Economics: A Comprehensive Guide" »

Cost Accounting Concepts and Objective Questions

Here are some key cost accounting concepts and objective-type questions to test your understanding:

Key Cost Accounting Concepts

1. Costing: Refers to the allocation of costs to cost centers and cost units.
2. Economic Order Quantity (EOQ): The optimal order quantity that minimizes total inventory costs.
3. Idle Time: Time spent by workers on unproductive activities.
4. Apportionment: The process of distributing overheads to various cost centers.
5. Profit under Absorption Costing: Higher when production exceeds sales compared to marginal costing.
6. Purpose of Cost Accounting: To ascertain and control costs.
7. Minimum Stock: The minimum level of inventory that must be maintained at all times.
8. Labor Turnover: Measured as

Business Studies

The NBER has formally affirmed that the US financial system is in a recession.

By putting into action an effective monetary policy, the Federal Reserve and the US government could uphold stable prices, thus sustaining conditions for long-standing economic expansion as well as increased employment opportunities. This study will explain how open market operations, discount rate, and reserve requirements could be utilized in order to stimulate the American economy.

Open Market Operations

Open market operations (OMOs) refer to the buying and selling of securities by a central bank in the open market to execute monetary policy. OMOs could be utilized in adjusting the supply of reserve balances in order to uphold the federal funds rate... Continue reading "Monetary Policy Tools to Revive the US Economy" »

There are several forms of business organizations, each with its own structure, advantages, and disadvantages. The choice of business organization affects factors like legal liability, taxation, management, and control. Here are the main forms of business organizations and their pros and cons:

1. Sole Proprietorship

A sole proprietorship is a business owned and operated by a single individual. It's the simplest form of business organization.

Advantages:

• Easy to set up and dissolve – Minimal legal formalities and low start-up costs.
• Complete control – The owner makes all decisions and keeps all profits.
• Tax simplicity – Profits are taxed as personal income, avoiding corporate taxes.

Disadvantages:

• Unlimited liability – The owner is personally

Mastering Post-Sale Customer Engagement

Achieving Repeat Sales

Repeat sales are earned by consistently demonstrating the ability to add value in diverse ways.

Responding to Post-Sale Customer Expectations

• Ensure your customer strategy is on target.
• Focus on diligent follow-through and follow-up activities.
• Regularly reexamine your product strategy.

Understanding Customer Attrition

Regaining a lost customer can be four to five times more expensive than retaining a current, satisfied customer.

Main Causes of Customer Attrition:

• Poor service
• Product dissatisfaction
• Price considerations

Key B2B Service Behaviors

1. Diligence: Persistence in service delivery.
2. Information Communication: Transparent and timely sharing of relevant updates.
3. Inducements: Offering incentives

The nature and scope of a business refer to the core characteristics and breadth of activities that define it. Here's how they are generally categorized:

Nature of the Business

1. Type of Business:

   • Goods: Involves the production, manufacturing, or distribution of physical products.
   • Services: Offers intangible products like consulting, healthcare, or banking.
   • Hybrid: Combination of goods and services (e.g., retail stores offering products and after-sales services).

2. Industry:

   • The sector in which the business operates, such as technology, healthcare, education, manufacturing, etc.

3. Ownership Structure:

   • Could be a sole proprietorship, partnership, corporation, or limited liability company (LLC), each with distinct legal and financial implications.

4. Business Objectives:

Gross Domestic Product

Gross Domestic Product (GDP) is a measurement of the market value of all final goods and services produced in a country during a given period. It is used to show how well an economy is performing compared to previous years.

GDP Inclusions and Exclusions

• GDP includes: Production within a country by foreign firms.
• GDP excludes: Foreign production by a country's firms.

Example: Clothing or products produced in China but sold in the United States would not be part of the U.S. GDP; instead, they would be part of China's GDP.

Intermediate Goods and Services

Intermediate goods and services are goods and services purchased for additional processing and resale.

$C+I+G+(X-M)=GDP$

Definition:

• $C\rightarrow$ Consumption
• $I\rightarrow$ Investment

Country Risk

Country Risk: Refers to the economic, social, and political conditions and events in a foreign country that may adversely affect operating profits or the value of assets when investing or lending in a country.

Political Risk

Political Risk: The political climate of a country in which a business operates is as important as the country's topography, natural resources, etc. A hospitable, stable government encourages business investment and growth.

Expropriation

Expropriation: Government seizure of property within its borders owned by foreigners, followed by prompt, adequate, and effective compensation paid to the former owners.

Confiscation

Confiscation: Government seizure of property within its borders owned by foreigners without payment... Continue reading "International Business Concepts: Risk, Trade, and Development" »

Capital Structure

Capital structure refers to how a company finances its operations and investments using different combinations of debt and equity. This structure significantly impacts the company's financial strength and profitability.

Simply put, a company can finance itself through debt (loans, bonds, etc.) or equity (stocks). The choice between these two types of financing determines the capital structure.

Debt involves borrowing money that must be repaid with interest. This can increase financial risk if the debt cannot be repaid, but it can also offer tax benefits due to the deductibility of interest.

Equity, on the other hand, involves financing the company by issuing and selling shares. This does not require interest payments, but it dilutes... Continue reading "Corporate Capital Structure and Pension Planning" »