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What is the primary goal of a financial manager appointed by shareholders?
Why is cash an important factor in financial decision-making?
What is the significance of time in financial decision-making?
What is the effect of uncertainty on the value of a future cash flow?
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What is a characteristic of a liquid market?
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What is the relationship between the value of the firm and the number of shares on issue?
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What is the primary objective of a financial manager in terms of share price?
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Why is risk an important consideration in financial decision-making?
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What is the primary goal of a financial manager in a corporation?
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What is the main difference between a real asset and a financial asset?
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What is the main advantage of a corporation as a type of firm?
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What is the purpose of a financial manager's day-to-day cash flow management?
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What is the main difference between a private company and a public company?
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What is the main goal of a financial manager when making investment decisions?
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What is the main disadvantage of a sole trader as a type of firm?
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If you submit a 'market order' to buy a stock, what price will you pay?
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What is the primary objective of a financial manager in a corporation?
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What is a characteristic of a liquid market?
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What is the main difference between a primary market and a secondary market?
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What is the bid price in a stock exchange?
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What is the ASX, and what did it stand for in the past?
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What is one of the three critical factors in finance, and why is it important?
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What is one of the three main ways to issue shares, and what is its advantage?
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What is the main advantage of a corporation, compared to a sole trader or partnership?
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Study Notes
Financial Management Goals
- The goal of the financial manager is to maximize the wealth of shareholders, which is equivalent to maximizing the value of the firm and share price.
- The financial manager is appointed by the shareholders to manage the firm and make decisions on their behalf.
Critical Factors in Finance
- There are three critical factors in finance: cash, time, and risk.
- Cash is important because only cash can be used to purchase things, pay debts, and satisfy consumption preferences.
- Time is important because money has a time value, and the value of a dollar is different depending on when it is received.
- Risk is important because the future is uncertain, and the probability of receiving a future cash flow determines its value.
Market Liquidity
- A market is "liquid" if it allows for the easy and quick conversion of securities into cash.
- A liquid market is necessary for the efficient allocation of resources.
Australian Stock Exchange (ASX)
- ASX stands for Australian Securities Exchange.
- In the past, ASX stood for Australian Stock Exchange.
- The change took place to reflect the broader range of securities traded on the exchange.
Primary and Secondary Markets
- A primary market is where new securities are issued, and companies raise capital from investors.
- A secondary market is where existing securities are traded, and investors buy and sell securities among themselves.
Bid and Ask Prices
- The bid price is the highest price at which a buyer is willing to buy a security.
- The ask price is the lowest price at which a seller is willing to sell a security.
- The ask price is higher than the bid price.
Types of Firms
- There are three types of firms: sole traders, partnerships, and corporations.
- Sole traders are the most common type of firm in terms of the number of businesses.
- Corporations dominate the economy in terms of total revenue generated.
Financial Assets
- Financial assets are securities that can be easily converted into cash.
- Examples of financial assets include cash, accounts receivable, and ordinary shares.
Financial Decisions
- The two main types of decisions made by a financial manager are investment decisions and financing decisions.
- Investment decisions involve deciding on the allocation of funds to different projects or assets.
- Financing decisions involve deciding on the source of funds, such as debt or equity.
Real and Financial Assets
- Real assets are physical assets, such as buildings, machines, and inventory.
- Financial assets are securities that can be easily converted into cash.
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Description
What is the primary goal of a financial manager? Maximizing shareholder wealth, firm value, or share price?
