Financial Management
1. What three trends affect business management in general and financial management in particular?
ANSWER: 1.The increased globalization of business 2. Ever-improving information technology 3. Corporate governance or the way the top managers operate and interface with stockholders.
2. What’s the difference between a stock’s current market price and its intrinsic value?
ANSWER: Market price is based on perceived but possibly incorrect information as seen by the marginal investor and is consider a current value unlike Intrinsic value is consider true value based on accurate risk and return data. Its profit return is on a long-run concept.
3. Do Stocks have known and “provable” intrinsic values, or might different people reach different conclusions about intrinsic values? Explain.
ANSWER: Yes, Stocks do have known and “provable” intrinsic values because a firm retain records of their investment earnings from year to year. Management usually provides information that helps investors make better estimates of the firm’s intrinsic value. Yes, different people do reach different conclusions about the intrinsic value to try and help outside security analysts to improve the value estimates by providing accurate information about the company’s financial position and operations without releasing information that would help its competitors.
4. Describe the four forms of business organization and define are the advantages and disadvantages of each business organization.
ANSWER: Proprietorship- is an unincorporated business owned by one Individual. Partnership- is a legal arrangement b/t two or more people who decide to do business together.
ANSWER: 1.The increased globalization of business 2. Ever-improving information technology 3. Corporate governance or the way the top managers operate and interface with stockholders.
2. What’s the difference between a stock’s current market price and its intrinsic value?
ANSWER: Market price is based on perceived but possibly incorrect information as seen by the marginal investor and is consider a current value unlike Intrinsic value is consider true value based on accurate risk and return data. Its profit return is on a long-run concept.
3. Do Stocks have known and “provable” intrinsic values, or might different people reach different conclusions about intrinsic values? Explain.
ANSWER: Yes, Stocks do have known and “provable” intrinsic values because a firm retain records of their investment earnings from year to year. Management usually provides information that helps investors make better estimates of the firm’s intrinsic value. Yes, different people do reach different conclusions about the intrinsic value to try and help outside security analysts to improve the value estimates by providing accurate information about the company’s financial position and operations without releasing information that would help its competitors.
4. Describe the four forms of business organization and define are the advantages and disadvantages of each business organization.
ANSWER: Proprietorship- is an unincorporated business owned by one Individual. Partnership- is a legal arrangement b/t two or more people who decide to do business together.