Podcast
Questions and Answers
Principle 2: A dollar received today is worth more than a dollar received in the future.
Principle 2: A dollar received today is worth more than a dollar received in the future.
True
Principle 4: The incremental cash flow is the difference between the projected cash flows if the project is selected, versus what they will be if the project is not selected.
Principle 4: The incremental cash flow is the difference between the projected cash flows if the project is selected, versus what they will be if the project is not selected.
True
Principle 3: Cash flow, not accounting profit, is used as the measurement tool.
Principle 3: Cash flow, not accounting profit, is used as the measurement tool.
True
Principle 5: It is hard to find exceptionally profitable projects in competitive markets.
Principle 5: It is hard to find exceptionally profitable projects in competitive markets.
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Principle 6: Efficient capital markets means the values of all assets and securities at any instant in time fully reflect all available information.
Principle 6: Efficient capital markets means the values of all assets and securities at any instant in time fully reflect all available information.
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Principle 7: The agency problem results from conflicts of interest between the manager/agent and the stockholder/owners.
Principle 7: The agency problem results from conflicts of interest between the manager/agent and the stockholder/owners.
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Principle 8: The cash flows considered are the after-tax incremental cash flows to the firm as a whole.
Principle 8: The cash flows considered are the after-tax incremental cash flows to the firm as a whole.
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Principle 9: The process of diversification can reduce risk, and as a result, measuring a project’s or an asset’s risk is very difficult.
Principle 9: The process of diversification can reduce risk, and as a result, measuring a project’s or an asset’s risk is very difficult.
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Principle 10: Each person has his or her own set of values, which forms the basis for personal judgments about what is the right thing.
Principle 10: Each person has his or her own set of values, which forms the basis for personal judgments about what is the right thing.
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Ethical Behavior is doing the right thing, and ethical dilemmas are everywhere in finance.
Ethical Behavior is doing the right thing, and ethical dilemmas are everywhere in finance.
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Financial Management refers to the efficient and effective management of money (funds) in such a manner as to achieve the goals of the organization.
Financial Management refers to the efficient and effective management of money (funds) in such a manner as to achieve the goals of the organization.
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The more risk an investment has, the lower its expected return will be.
The more risk an investment has, the lower its expected return will be.
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Understanding the ten principles of financial management is not necessary to understand finance.
Understanding the ten principles of financial management is not necessary to understand finance.
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Present value and future value cannot be calculated in financial management.
Present value and future value cannot be calculated in financial management.
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Financial management includes planning, organizing, directing, and controlling the financial activities of the organization.
Financial management includes planning, organizing, directing, and controlling the financial activities of the organization.
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The concept of time value of money is not relevant to financial management.
The concept of time value of money is not relevant to financial management.
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Study Notes
Financial Management Principles
- A dollar received today is worth more than a dollar received in the future, due to the time value of money.
- The incremental cash flow is the difference between the projected cash flows if a project is selected, versus what they will be if the project is not selected.
- Cash flow, not accounting profit, is used as the measurement tool in financial management.
- In competitive markets, it is hard to find exceptionally profitable projects.
- Efficient capital markets imply that the values of all assets and securities at any instant in time fully reflect all available information.
Cash Flows and Risk
- The cash flows considered in financial management are the after-tax incremental cash flows to the firm as a whole.
- Diversification can reduce risk, making it difficult to measure a project's or an asset's risk.
- The expected return of an investment decreases as the level of risk increases.
Ethical Behavior and Financial Management
- Ethical Behavior involves doing the right thing, and ethical dilemmas are prevalent in finance.
- Each person has their own set of values, which form the basis for personal judgments about what is right.
Financial Management Functions
- Financial management includes planning, organizing, directing, and controlling the financial activities of the organization.
- The primary goal of financial management is to achieve the organization's goals efficiently and effectively.
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Description
Test your knowledge on financial management principles, including concepts of finance, corporate world, time value of money, financial statements, risk and return, and financial ratios.
