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Questions and Answers
What is the primary focus of a financial manager compared to an accountant?
What is the primary focus of a financial manager compared to an accountant?
Which financing need is associated with the cash flow from profit?
Which financing need is associated with the cash flow from profit?
In terms of firm operations, what does 'M' stand for?
In terms of firm operations, what does 'M' stand for?
What is the primary purpose of financial management?
What is the primary purpose of financial management?
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Which component is NOT included in calculating the return on investment?
Which component is NOT included in calculating the return on investment?
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What does it mean when it is stated that 'cash is king' in finance?
What does it mean when it is stated that 'cash is king' in finance?
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When evaluating investments, what is a critical consideration for investors?
When evaluating investments, what is a critical consideration for investors?
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What two key financing options can a company pursue?
What two key financing options can a company pursue?
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In the context of investments, what do dividends represent for investors?
In the context of investments, what do dividends represent for investors?
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What financial metric is typically used to assess an investment's performance over a year?
What financial metric is typically used to assess an investment's performance over a year?
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What factor does NOT influence the decision between borrowing and issuing stock?
What factor does NOT influence the decision between borrowing and issuing stock?
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What does the income statement primarily show?
What does the income statement primarily show?
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Which statement correctly describes the balance sheet?
Which statement correctly describes the balance sheet?
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Why is the equation Assets = Liabilities + Shareholders' Equity important?
Why is the equation Assets = Liabilities + Shareholders' Equity important?
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Which of the following is true about cash flow and profit?
Which of the following is true about cash flow and profit?
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What information does the statement of cash flows provide?
What information does the statement of cash flows provide?
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How are long-lived assets categorized in the balance sheet?
How are long-lived assets categorized in the balance sheet?
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When reviewing the balance sheet, what does a snapshot refer to?
When reviewing the balance sheet, what does a snapshot refer to?
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Which of the following is NOT a component of the statement of cash flows?
Which of the following is NOT a component of the statement of cash flows?
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Study Notes
Managerial Finance Lecture 1 - Introduction
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Learning Objectives:
- Define the role of finance.
- Define the role of a financial manager.
- Review financial statements.
What is the Role of Finance?
- Finance involves making decisions about investments and financing.
- The goal is to maximize shareholder wealth.
- Finance functions by:
- Making the right financial decisions to generate sales revenue at the lowest cost.
- Making the right investment decisions to achieve shareholders’ wealth.
- Satisfying shareholders through increasing stock price and dividend payments.
What is the Role of a Financial Manager?
- The role of a financial manager involves three main tasks:
- Financing: Raising funds, repaying interest and loan obligations, and returning cash to investors (dividends).
- Investing: Making investment decisions.
- Management of resources: Generating cash flow from operations and reinvesting cash.
Review of Financial Statements
- Financial statements provide information about a company's financial performance and position.
- Income Statement: Shows profitability over a period of time (revenues - expenses = profit/loss).
- Balance Sheet: Shows the financial position at a specific point in time (assets = liabilities + equity).
- Statement of Cash Flows: Shows the change in cash over a period of time (operating, investing, financing activities).
Example: Carrefour 2017
- Revenues: 91,513 million Euros
- Expenses: 90,945 million Euros
- Profit: 568 million Euros (profitability over a certain period - year)
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Balance Sheet (Carrefour) 2017: Shows the financial position of the firm at a particular point.
- Assets: 53,650 million
- Liabilities: 43,087 million
- Shareholders Equity: 10,563 million
- Assets = Liabilities + Shareholder's equity
What is Finance?
- A broad concept concerning financial decisions that maximize shareholder wealth.
Additional Details
- Ret vs Risk: Risk and return are important considerations
- Best Investment: No single best investment across all conditions - the best investment is contingent on the circumstances.
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Investor Return: Investors receive a return from organizations listed in stock exchanges, which are comprised of profits, assets, and cash flow.
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Example: Carrefour 2019 return on investment.
- Purchase price per share: 27.52 Euro
- Dividend per share: 1.08 cents
- Sale price per share: 33.06 Euro
- Calculate ROI using the formula: ROI = (capital gains + dividends) / investment.
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Example: Carrefour 2019 return on investment.
- Carrefour 2020 (example): Information is available on stock price as at Dec 31/2020, and at the start of 2020, market cap(21,005 Billion), dividend per share (1.05 euro) and dividend yield 3.5%
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Description
Explore the foundational concepts of Managerial Finance in this introductory lecture. Learn about the crucial roles of finance and financial managers, including key responsibilities surrounding investments, financing, and resources management. This quiz will enhance your understanding of financial statements and shareholder wealth maximization.
