Question

The financial manager has three major tasks. These involve making decisions about capital budgeting, capital structure and working capital management. As I indicated earlier, "the acquiring funds" part or "the finding the lowest cost funds" part corresponds to capital structure decision. Should the firm borrow money from the bank, issue bonds or stocks to generate funds? This would be a capital structure decision. Finding profitable investments part of "finding those investment projects with the highest return adjusted for risk" part belongs to capital budgeting decisions. Working capital management decisions refer to doing both in the short-term, managing short-term assets such as inventories and short-time liabilities such as paying cahs to suppliers. Your third question is the following: Briefly explain the three major tasks of the financial manager. Be sure to use examples that are original to your answer.

Answer 1

Corporate finance is one of the most important subjects in the financial domain. It is deep-rooted in our daily lives. All of our work in big or small corporations. These corporations raise capital and then deploy this capital for productive purposes. The financial calculations that go behind raising and successfully deploying capital are what form the basis of corporate finance.

Money committed or property acquired for future income is called investments

Private (shareholder-owned) or public (government-owned) organizations that, broadly speaking, act as a channel between savers and borrowers of funds (suppliers and consumers of capital)

The economic and monetary system that transcends national borders. The field of international finance concerns itself with studying global capital markets and might involve monitoring movements in foreign exchange rates, global investment flows and cross border trade practices.

• Creditors decide to loan money to a corporation based on the riskiness of the company, its capital structure, and its potential capital structure. All of these factors will affect the company’s potential cash flow, which is a creditors’ main concern.
• Stockholders, however, have control of such decisions through the managers.
• Since stockholders will make decisions based on their best interests, a potential agency problem exists between the stockholders and creditors. For example, managers could borrow money to repurchase shares to lower the corporation’s share base and increase shareholder return. Stockholders will benefit; however, creditors will be concerned given the increase in debt that would affect future cash flow