...CHAPTER 1 The correct answer for each question is indicated by a . | | | | 1 | INCORRECT | | A secondary market transaction can occur in either a dealer market or an auction market. | | | | | A) | True | | | | | | B) | False | | | | Feedback: True | | | | 2 | CORRECT | | Control of a firm ultimately rests with the stockholders. | | | | | A) | True | | | | | | B) | False | | | | Feedback: True | | | | 3 | INCORRECT | | It is generally easier to form a sole proprietorship than it is to form a corporation. | | | | | A) | True | | | | | | B) | False | | | | Feedback: True | | | | 4 | CORRECT | | One advantage of the corporate form of organization is that you can buy shares in a corporation such as Wal-Mart without worrying about being held personally liable for the corporation's liabilities. | | | | | A) | True | | | | | | B) | False | | | | Feedback: True | | | | 5 | INCORRECT | | A financial manager must be concerned with three basic areas: Capital budgeting, capital structure, and working capital. | | | | | A) | True | | | | | | B) | False | | | | Feedback: True | | | | 6 | INCORRECT | | Which of the following responses best completes the following: The duties of a working capital manager include | | | | | A) | Deciding how to raise the money required to fund...
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...Behavioural Finance Martin Sewell University of Cambridge February 2007 (revised April 2010) Abstract An introduction to behavioural finance, including a review of the major works and a summary of important heuristics. 1 Introduction Behavioural finance is the study of the influence of psychology on the behaviour of financial practitioners and the subsequent effect on markets. Behavioural finance is of interest because it helps explain why and how markets might be inefficient. For more information on behavioural finance, see Sewell (2001). 2 History Back in 1896, Gustave le Bon wrote The Crowd: A Study of the Popular Mind, one of the greatest and most influential books of social psychology ever written (le Bon 1896). Selden (1912) wrote Psychology of the Stock Market. He based the book ‘upon the belief that the movements of prices on the exchanges are dependent to a very considerable degree on the mental attitude of the investing and trading public’. In 1956 the US psychologist Leon Festinger introduced a new concept in social psychology: the theory of cognitive dissonance (Festinger, Riecken and Schachter 1956). When two simultaneously held cognitions are inconsistent, this will produce a state of cognitive dissonance. Because the experience of dissonance is unpleasant, the person will strive to reduce it by changing their beliefs. Pratt (1964) considers utility functions, risk aversion and also risks considered as a proportion of total assets. Tversky and Kahneman...
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...Behavioural Finance Martin Sewell University of Cambridge February 2007 (revised April 2010) Abstract An introduction to behavioural finance, including a review of the major works and a summary of important heuristics. 1 Introduction Behavioural finance is the study of the influence of psychology on the behaviour of financial practitioners and the subsequent effect on markets. Behavioural finance is of interest because it helps explain why and how markets might be inefficient. For more information on behavioural finance, see Sewell (2001). 2 History Back in 1896, Gustave le Bon wrote The Crowd: A Study of the Popular Mind, one of the greatest and most influential books of social psychology ever written (le Bon 1896). Selden (1912) wrote Psychology of the Stock Market. He based the book ‘upon the belief that the movements of prices on the exchanges are dependent to a very considerable degree on the mental attitude of the investing and trading public’. In 1956 the US psychologist Leon Festinger introduced a new concept in social psychology: the theory of cognitive dissonance (Festinger, Riecken and Schachter 1956). When two simultaneously held cognitions are inconsistent, this will produce a state of cognitive dissonance. Because the experience of dissonance is unpleasant, the person will strive to reduce it by changing their beliefs. Pratt (1964) considers utility functions, risk aversion and also risks considered as a proportion of total assets...
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...Finance and Performance Management Mastery and the High Performance Business At Accenture, we have always believed that a direct correlation exists between the sophistication of an organization’s finance and performance management capabilities and its overall performance. 2 Now, we’ve put that theory to the test. In a recent landmark study, Accenture examined the relationship between finance and high performance. The results show a tangible link and strong correlation between a high-performance business and mastery of a new finance competency set. The results also reveal that those companies that created the greatest value have embraced entirely new ways of thinking about finance and performance management. Achieving High Performance Accenture defines high-performance businesses as organizations that consistently outperform their peers over a sustained timeframe (typically 5 to 7 years) and across business cycles, industry disruptions and CEO leadership cycles. These companies deliver consistently upper-quartile total returns to shareholders. They create returns on invested capital significantly in excess of the cost of capital and drive profitable revenue growth faster than their industry peers. In short, they are lean, responsive to changing competitive fundamentals and consistently rank as market leaders. How do they do it? Accenture embarked on a major research program to identify the attributes and practices that distinguish high-performance businesses from...
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...analysis employing both descriptive and inferential statistics for analysis. A sample size of 150 respondents and 90 firms were selected for both primary data and secondary data respectively. Descriptive statistics was used to analyse the primary data, while Chi-Square was used to draw inference of perceived relationship between capital structure and firm value. The results of the study suggested that a positively significant relationship exists between a firm’s choice of capital structure and its market value in Nigeria. The study suggested that listed firms in Nigeria should strategically plan and manage their capital structure in order to maximize their market values. Keywords: Capital structure, market value, Nigeria, debt, equity. 1. Introduction 1.1 Background to the Study After the Modigliani-Miller (1958 and 1963) paradigms on firms’ capital structure and their market values, there have been considerable debates, both in theoretical and empirical researches on the nature of relationship that exists between a firm’s choice of capital structure and its market value. Debates have centred on whether there is an optimal capital structure for an individual firm or whether the proportion of debt usage is relevant to the individual firm's value (Baxter, 1967). Although, there have...
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...Team motto: “Full effort is full victory“ (Mahatma Gandhi) Relationship between Finance and Strategy • Finance helps align Strategy to reality, while from another angle, Financial decisions need to be aligned to Strategy and to an organization’s strategic objectives: o Finance helps measure the effectiveness of strategy by giving it metrics through which it can be evaluated on. These metrics help determine which strategy can create the most value for a certain organization; o Finance and Strategy work in tandem and in continuous cycles. Strategy is used to formulate and identify long term goals and means of achieving such goals. Finance goes on to align strategy with reality, providing metrics to evaluate its effectiveness; o Finance plays part in the Strategic decision making, as financing choices and capital raising strategies (debt vs. equity) will impact the value and the image of the firm, this is a topic of concern to the decision makers. • Both Finance and Strategy are concerned with value creation for their stakeholders whether it is the shareholders, the employees, the management etc. Strategy from a qualitative point-of-view (for instance by finding the drivers of competitive advantage for the stockholders and devising means to exert some pressure on those drivers in order to create value). While Finance is quantitative, meaning that it is a measure of the created value resulting from the strategy. This is more about determining the exact...
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...ISLAMIC BANKING INDUSTRY Course Title Instructor Institution City and State Date Abstract Islamic banking is on a steep rise in western countries. The increase is due to the management and the demand of Islamic financial products from both the Muslim and the non-Muslim residents in the United Kingdom. Another contributor to the increase in Islamic financing is the fact that the opponents are slowly joining and investing in the Islamic financial products due to their high demand. The United Kingdom has emerged to be the core of Islamic banking for over thirty years now. The reason behind the tremendous performance in the Islamic banking industry is the fact the Islamic population is greatly increasing offering ready market for the financial products. The purpose of this paper is to examine in details the major contributors to the expanding Islamic banking industry as well as the major setbacks that face the Islamic banking industry mostly in the United Kingdom. The findings were collected from random questionnaires given and also interview conducted on four major groups which are; Islamic banking staff, the Islamic banking competitors, the clients and also the non-clients. Background The paper presents the general background of the Islamic banking industry in the United Kingdom as well as the challenges. The Islamic banking started as a result of the Egyptians’ Mit Shamir, who opted to share profits and losses back in the year 1963. After three years of operation...
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...THE CAPITAL ASSET PRICING MODEL This note discusses how some of the most financially sophisticated companies and financial advisers estimate the cost of equity capital. We particularly focus on areas where finance theory is silent or ambiguous, and practitioners are left to their own devices. Conclusions are based on interviews with two groups: (1) well-regarded firms ranked by peer companies as industry leaders and (2) a sample of 11 of the most active financial advisers (investment banks). For context on academic advice, we also cite recommendations from topselling graduate-level textbooks and trade books in corporate finance.1 Findings The Capital Asset Pricing Model (CAPM) is the dominant model for estimating the cost of equity, with over 90% of firms and all the financial advisers employing this model. Moreover firms and advisers seldom mentioned other asset-pricing models. Yet disagreements exist on how to apply the CAPM. The CAPM states that the required return (R) on any asset can be expressed as Equation 1: R = R f + ( Rm - R f ) (1) 1 Survey evidence and much of the discussion is adapted from T. Brotherson, K. Eades, R. Harris, and R. Higgins, “‘Best Practices’ in Estimating the Cost of Capital: An Update,” Journal of Applied Finance 23, no. 1 (2013), which is an update of an earlier article: R. Bruner, K. Eades, R. Harris, and R. Higgins, “‘Best Practices’ in Estimating the Cost of Capital: Survey and Synthesis,” Financial Practice and Education...
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...Finance for Manager Contents | Introduction | 3 | The requirements and techniques for financial recording and reporting | 1.1 Explain the purpose and requirement for keeping financial records1.2 Examine techniques for recording financial information in a business organization1.3 Analyze the legal and organizational requirements for financial reporting1.4 Appraise the usefulness of financial statements to stakeholders | 4445 | How working capital can be effectively managed | 2.1 Examine components of working capital2.2 Clarify how business organizations can effectively manage working capital | 66 | Comprehend management accounting techniques | 3.1 Explain the difference between management and financial accounting3.2 Explain the budgetary control process3.3 Calculate and interpret variances from budget3.4 Evaluate the use of different costing methods for pricing purposes | 7778 | How to evaluate business projects | 4.1 Demonstrate the main methods of project appraisal4.2 Evaluate methods of project appraisal4.3 Explain how finance might be obtained for a business project | 999 | Conclusion | 11 | References | 12 | Introduction Most of the small businesses started as family business. Alesta Cleaning is one of them. Finance is a very important part for any business including Alesta Cleaning. Proper financing and keeping the record of finance is important for the organization to get the profile ready to use anywhere. Financial control on the growing business...
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...|Title |IT205 Smart Scenario - Clarifying Business Strategy Through Database Analysis | |Event Coordinator | |What are the current problems that the Event Coordinator is having? (multiple choice, multi-select) | | | |☐ System is disconnected from other departments. | |☑ Too much manual intervention in the business process. | |☐ Required information is not always available. | |☐ Information retention is inefficient or non-existent. | |☐ Poor use of available information technology resources. | |☑ Insufficient use of database technology or tools. | |☐ Poor communication. ...
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...also included to compare to the education requirements of each career and even though there are many similarities between the two, there are many differences. For example, both careers require good written and oral comprehension but an accountant needs to have excellent mathematic skills and be able to choose the right formula to solve a problem. This skill is not as important as a financial analyst as is the ability to develop solutions to complex problems that need to be solved. Your college transcript shows your focus in accounting and mathematics which falls under an accountant’s criteria. You could use this degree as a financial analyst however you would need to take some more finance or risk management. We feel that with all these facts considered, a career as an accountant is the best choice for you. Thank you for this opportunity. Please review the enclosed...
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...several definitions of behavioural finance exist, there is considerable agreement between them. According to Lintner, “Behavioural finance is the study of how humans interpret and act on information to make informed investment decisions.” Olsen opines that ‘behavioural finance does not try to define ‘rational’ behaviour or label decision making as biased or faulty; it seeks to understand and predict systematic financial market implications of psychological decision processes.’ It should be noted that no unified theory of behavioural finance exists at this time. Behavioural finance is based on research of human and social recognition and emotional tolerance studies to identify and understand incoming economic decisions. Behaviour finance examines recognition and emotional factors influence on the market changes and concentrates on the limited human rationality, explains the psychology effect on the financial activities and argues that financial phenomena can be better explained due to the fact that financial market participants are not rational and their decisions are...
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...POST GRADUATE PROGRAMME IN MANAGEMENT AY 2015-16 TERM: III TITLE OF THE COURSE: FINANCE II CREDITS: 4 Name of the Faculty Arnab Bhattacharya Gaurav Singh Chauhan Kousik Guhathakurta Radha M. Ladkani Faculty Block/ Room No. J BLOCK C-102 A-106 J BLOCK Email Telephone Number arnabb@iimidr.ac.in gauravs@iimidr.ac.in kousikg@iimidr.ac.in; radhal@iimidr.ac.in; 0731-2439589 0731-2439592 0731-2439518 0731-2439698 COURSE DESCRIPTION The second core course in Finance deals with the core corporate finance functions in an applied setting. The participants are exposed to real world corporate finance decisions to be taken up by managers for creating value. Such an exposure is accomplished through a mix of theory and practice. The pedagogy employed reflects a judicious mix of case discussions, lectures and problem solving approach. COURSE OBJECTIVES The objective is to familiarize participants with the three major decision areas of Corporate Finance, viz. the investments, financing and earnings distribution decisions. Subsequently the participants are to be offered an integrated view of the decision areas by discussing the issues in corporate valuations and risk management. The course aims at sharpening the financial decision making skills of the participants. EXPECTED LEARNING OUTCOMES AND ASSOCIATED MEASURES At the end of the course student is expected to accomplish the following learning outcomes. Alignment of Course Learning Outcomes (CLOs)...
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...[pic] Ecole Supérieure Libre des Sciences Commerciales Appliquées Review of Literature Behavioral Finance Presented to Dr. Mohamed EL-Hennawy Group Assignment Prepared By Albert Naguib Noha Samir Wael Shams EL-Din Moshira Gamil Marie Zarif January 2012 | TABLE OF CONTENTS | | | |List of Table………………………………………………………………………….. | |List of Figure ………………………………………………………………………… | |List of Abbreviations/Acronyms ……………………………………………………. | |Introduction……………………………………………………………………….. | |2. Appearance of Behavioral Finance…………………………………………………… | |2.1. Important Contributors…………………………………………………. ………. | |3. Behavioral Biases…………………………………………………………………… ...
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...A STUDY OF FACTORS INFLUENCING THE SELECTION OF A HIGHER EDUCATION INSTITUTION Mohar bin Yusof Tun Abdul Razak University, Malaysia mohar@unitar.edu.my Siti Nor Bayaah binti Ahmad Tun Abdul Razak University, Malaysia ctnor11@unitar.edu.my Misyer bin Mohamed Tajudin Tun Abdul Razak University, Malaysia misyer64@unitar.edu.my R. Ravindran Tun Abdul Razak University, Malaysia ravindran@unitar.edu.my ABSTRACT The higher education landscape in Malaysia has gone through substantial changes. With improvements in the quality of education and better academic performance at the primary and secondary school level, the demand for tertiary education has increased many fold. The increased public demand for tertiary education and the government’s aspiration to position Malaysia as a regional centre of academic excellence have led to the higher education market becoming monopolistically competitive. The purpose of the research was to examine the expectations on higher education institutions among three groups of respondent i.e. prospective students, parents of prospective students and first year university students, and to identify the factors influencing their preferences in selecting a particular higher education institution. KEY WORDS: Preferences, Higher Education Institutions, Expectations, Higher Education Market, Market Research UNITAR E-JOURNAL Vol. 4, No. 2, June 2008 27 INTRODUCTION Over the span of ten years or so, the higher education...
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