Financial management Essay Example for Free

Financial management Essay Q1. What are the goals of financial management? Ans. Financial management means maximization of economic welfare of its shareholders. Maximization of economic welfare means maximization of wealth of its shareholders. Shareholder’s wealth maximization is reflected in the market value of the firm’s shares. Experts believe that, the goal of financial management is attained when it maximizes the market value of shares. There are two versions of the goals of financial management of the firm- Profit Maximization and Wealth Maximization. Profit maximization Profit maximization is based on the cardinal rule of efficiency. Its goal is to maximize the returns with the best output and price levels. A firm’s performance is evaluated in terms of profitability. Profit maximization is the traditional and narrow approach, which aims at maximizing the profit of the concern. Allocation of resources and investor’s perception of the company’s performance can be traced to the goal of profit maximization. Wealth maximization The term wealth means shareholder’s wealth or the wealth of the persons those who are involved in the business concern. Wealth maximization is those who are involved in the business concern. Wealth maximization is also known as value maximization or net present worth maximization. This objective is an universally accepted concept in the field of business. Wealth maximization is possible only when the company pursues policies that would increase the market value of shares of the company. It has been accepted by the finance managers as it overcomes the limitations of profit maximization. The following arguments are in support of the superiority of wealth maximization over profit maximization: * Wealth maximization is based on the concept of cash flows. Cash flows are a reality and not based on any subjective interpretation. On the other hand, profit maximization is based on any subjective interpretation. On the other hand, profit maximization is based on accounting profit and it also contains many subjective elements. * Wealth maximization considers time value of money. Time value of money translates cash flow occurring at different periods into a comparable value at zero period. In this process, the quality of cash flow is considered critical in all decisions as it incorporates the risk associated with the cash flow stream. It finally crystallizes into the rate of return that will motivate investors to part with their hard earned savings. Maximizing the wealth of the shareholders means net present value of the decisions implemented. Q2. Explain the factors affecting Financial Plan. Ans. To help your organization succeed, you should develop a plan that needs to be followed. This applies to starting the company, developing new product, creating a new department or any undertaking that affects the company’s future. There are several factors that affect planning in an organization. To create an efficient plan, you need to understand the factors involved in the planning process. Organizational planning is affected by many factors: Priorities In most companies, the priority is generating revenue, and this priority can sometimes interfere with the planning process of any project. When you start the planning process for any project, you need to assign each of the issues facing the company a priority rating. That priority rating will determine what issues will sidetrack you from the planning of your project, and which issues can wait until the process is complete. Company Resources Having an idea and developing a plan for your company can help your company to grow and succeed, but if the company does not have the resources to make the plan come together, it can stall progress. One of the first steps to any planning process should be an evaluation of the resources necessary to complete the project, compared to the resources the company has available. Some of the resources to consider are finances, personnel, space requirements, access to materials and vendor relationships. Forecasting A company constantly should be forecasting to help prepare for changes in the marketplace. Forecasting sales revenues, materials costs, personnel costs and overhead costs can help a company plan for upcoming projects. Without accurate forecasting, it can be difficult to tell if the plan has any chance of success, if the company has the capabilities to pull off the plan and if the plan will help to strengthen the company’s standing within the industry. For example, if your forecasting for the cost of goods has changed due to a sudden increase in material costs, then that can affect elements of your product roll-out plan, including projected profit and the long-term commitment you might need to make to a supplier to try to get the lowest price possible. Contingency Planning To successfully plan, an organization needs to have a contingency plan in place. If the company has decided to pursue a new product line, there needs to be a part of the plan that addresses the possibility that the product line will fail. Q3. Explain the time value of money. Ans. Money has time value. A rupee today is more valuable than a year hence. It is on this concept â€Å"the time value of money† is based. The recognition of the time value of money and risk is extremely vital in financial decision making. Most financial decisions such as the purchase of assets or procurement of funds, affect the firm’s cash flows in different time periods. For example, if a fixed asset is purchased, it will require an immediate cash outlay and will generate cash flows during many future periods. Similarly if the firm borrows funds from a bank or from any other source, it receives cash and commits an obligation to pay interest and repay principal in future periods. The firm may also raise funds by issuing equity shares. The firm’s cash balance will increase at the time shares are issued, but as the firm pays dividends in future, the outflow of cash will occur. Sound decision-making requires that the cash flows which a firm is expected to give up over period should be logically comparable. In fact, the absolute cash flows which differ in timing and risk are not directly comparable. Cash flows become logically comparable when they are appropriately adjusted for their differences in timing and risk. The recognition of the time value of money and risk is extremely vital in financial decision-making. If the timing and risk of cash flows is not considered, the firm may make decisions which may allow it to miss its objective of maximizing the owner’s welfare. The welfare of owners would be maximized when Net Present Value is created from making a financial decision. It is thus, time value concept which is important for financial decisions. Thus, we conclude that time value of money is central to the concept of finance. It recognizes that the value of money is different at different points a of time. Since money can be put to productive use, its value is different depending upon when it is received or paid. In simpler terms, the value of a certain amount of money today is more valuable than its value tomorrow. It is not because of the uncertainty involved with time but purely on account of timing. The difference in the value of money today and tomorrow is referred as time value of money. Q6. What are the assumptions of MM approach? Ans. Modigliani Millar approach, popularly known as the MM approach is similar to the Net operating income approach. The MM approach favors the Net operating income approach and agrees with the fact that the cost of capital is independent of the degree of leverage and at any mix of debt-equity proportions. The significance of this MM approach is that it provides operational or behavioral justification for constant cost of capital at any degree of leverage. Whereas, the net operating income approach does not provide operational justification for independence of the companys cost of capital. Basic Propositions of MM approach: 1. At any degree of leverage, the companys overall cost of capital (ko) and the Value of the firm (V) remains constant. This means that it is independent of the capital structure. The total value can be obtained by capitalizing the operating earnings stream that is expected in future, discounted at an appropriate discount rate suitable for the risk undertaken. 2. The cost of capital (ke) equals the capitalization rate of a pure equity stream and a premium for financial risk. This is equal to the difference between the pure equity capitalization rate and ki times the debt-equity ratio. 3. The minimum cut-off rate for the purpose of capital investments is fully independent of the way in which a project is financed. Assumptions of MM approach: 1. Capital markets are perfect. 2. All investors have the same expectation of the companys net operating income for the purpose of evaluating the value of the firm. 3. Within similar operating environments, the business risk is equal among all firms. 4. 100% dividend payout ratio. 5. An assumption of no taxes was there earlier, which has been removed. Limitations of MM hypothesis: 1. Investors would find the personal leverage inconvenient. 2. The risk perception of corporate and personal leverage may be different. 3. Arbitrage process cannot be smooth due the institutional restrictions. 4. Arbitrage process would also be affected by the transaction costs. 5. The corporate leverage and personal leverage are not perfect substitutes. 6. Corporate taxes do exist. However, the assumption of no taxes has been removed later.

Differences of Love in Shakespeares Romeo and Juleit Essay -- Shakespe

Two lovers, different in beliefs, yet the same in thoughts and feelings, are set to have a tragic ending in their life story. In William Shakespeare's The Tragedy of Romeo and Juliet, Shakespeare portrays differences between the love of Romeo for Juliet, and the love of Juliet for Romeo. Many people often wonder why this love between Romeo Montague and Juliet Capulet did not turn out for the best. It is not their love for one another that finally breaks them apart from the world, it is the way they love one another. The couple struggled to the death trying to make their passionate love work out with each other, but their many differences kept coming up in their lives and getting in the way of their love. While Romeo is a Manic lover and Juliet is an Erotic lover, their love is more likely to be star-crossed. Romeo is a Manic type of lover, which is the main reason why The Tragedy of Romeo and Juliet did not have a happy ending. There are many examples of Romeo being a Manic lover. One good example is when he is talking to Friar Lawrence the morning after Romeo meets Juliet and sneaks away to her house to woo her. Romeo says to Friar Lawrence, ?Then plainly know my hearts dear love is set / On the fair daughter of rich Capulet, / As mine on hers, so hers is set on mine?/ We met, we wooed, and made exchange of vow?/ That thou consent to marry us today? (II, iii, 57-59, 62, 64). This explains how Romeo becomes intensely preoccupied with thoughts of Juliet and need for Juliet?s love. Romeo?s heart is set on Juliet, and he can?t stop thinking about her. Inside, Romeo also knows that Juliet loves him, too, and her heart is set on his. Love at first sight is quick on Romeo. After less than one day of knowing her, Romeo has ... ...n love at first sight, this story may have had a different ending. In The Tragedy of Romeo and Juliet, Shakespeare clearly displays the tragic ending between Romeo and Juliet. The tragedy is not because of their love for one another, but for the differences between the ways they loved each other. Romeo was too fast for Juliet, and Juliet was too ideal for Romeo. If Romeo had been an Erotic lover, or Juliet had been a Manic lover, this tragedy may have ended up differently. It may not have even been a tragedy at all. Despite all the struggles between differences and families, Romeo and Juliet still had a very passionate love for each other at the ending, although it did not turn out as they had first planned. Romeo and Juliet?s love for one another did not have a truly happy ending, because the love between Romeo and Juliet was star-crossed from the beginning.

Play And Physical Health Essay

Play is characterized by behaviors that are intrinsically motivated and self initiated. It is a process oriented, non-literal and pleasurable activity. it also has other characteristics as being exploratory, among other things (Fromberg, 2002). Play is an encompassing activity that affects the physical (Frost et al. 2001), social (Murata & Maeda, 2002), emotional and cognitive development of the child. (Murata & Maeda, 2002) Children spend an ample of their time playing. Children interact with their peers and parents most time by playing with them. A lot of their interaction with their parents builds their intellectual prowess. They learn to build social bonds with their family. (Rivkin 1995) . Moreover, interacting with their peers help them to become individuals that are completely incorporated into the society. Interaction with their colleagues sometimes brings about traumatic experiences like inflicting bodily wounds. The effect of what they do might linger with them for the rest of their lives. However sweet the playing experience could be, it can also be nasty. Aside from sharpening the physical and mental agility of a child, playing can also bring upon them serious medical emergencies as a result of accidents. Although play is an important part of sociological interaction, it is one of the major ways by which children learn role playing. Playing is also a way by which children keep themselves healthy. (Murata & Maeda, 2002) Play is good for the children but in order for it to bring out the desired results, it must be in the right environment (Rivkin 1995). The environment must be attractive enough to facilitate the play so as to encourage the action. In selecting play objects for children, it is important to consider their abilities and temperament so as not to inadvertently hand them tools that they can use in inflicting bodily harm to themselves and their peers. Also, they must play under the supervision of an older adult to monitor their activities. Play is pleasurable, it is good for the development of the child but it must not be allowed to get out of hand.

Habits and Traits of Bess Beetles

Bess beetles live together in family groups, with males and females sharing parenting duties. They go by quite a few common names: bessbugs, patent leather beetles, horn beetles, Betsy beetles, and peg beetles. Bess beetles belong to the family Passalidae and share certain habits and traits. Physical Characteristics Bess beetles can be quite large, measuring up to 70 or 80 mm in length. Theyre shiny and black, which is why some people refer to them as patent leather beetles. Youll notice a pronounced gap between the deeply grooved elytra and the pronotum. A single groove divides the pronotum in two. To distinguish bess beetles from other similar beetle families, youll also need to examine the head, mouthparts, and antennae. The bess beetles head will be narrower than the pronotum, and the mouthparts project forward. The antennae have 10 segments, and are not elbowed. They terminate in a 3-segmented club. Classification Kingdom: AnimaliaPhylum:Â  ArthropodaClass:Â  InsectaOrder:Â  ColeopteraFamily:Â  Passalidae Diet Both adults and larvae feed on decaying wood. Both male and female bess beetles prepare the food by chewing it before feeding it to their young. Adults and larvae also feed on adult feces, which is predigested by microorganisms that break down cellulose. Life Cycle Bess beetles undergo complete metamorphosis. Adults mate within the tunnel system they excavate in a rotting log. The female lays her eggs in a nest made of masticated wood. Bess beetle larvae prepare to pupate about two months after eclosure from the egg. With the help of adults, the larvae constructs a pupal case made from frass. The larva works from the inside, and the adults from the outside. Adult bess beetles may live for over two years. Special Adaptations and Defenses Kids often like bess beetles because they squeak when you disturb them. Adult bess beetles stridulate by rubbing the undersides of their wings across their abdomens. Larvae can talk, too. Bess beetles have a remarkably complex language, making 14 distinct sounds. Home Range Entomologists list over 500 species of bess beetles worldwide, most living in the tropics. Just two species inhabit the U.S.