Managerial Finance Overview

A financial asset is a claim on an economic resource, such as stocks, bonds, or bank deposits, while a non-financial asset is a tangible asset, such as a piggery, poultry farm, or jewelry.

Interest spread refers to the difference between the interest rate earned on loans or investments and the interest rate paid on deposits. It's a key measure of profitability for financial institutions, as it represents the profit margin earned on their lending activities.

The three fundamental principles are: more value is preferred to less, cash received sooner is more valuable, and less risky assets are preferred to riskier assets. These principles guide financial decisions by emphasizing the pursuit of maximizing wealth, minimizing time value of money and reducing risk.

<p>Effective cash management ensures that a firm has sufficient funds available when needed, minimizes the risk of cash shortages, and maximizes the profitability of its operations. This involves detailed cash flow budgeting, controlling expenses, and optimizing the use of funds.</p> Signup and view all the answers

<p>The reorder point is the minimum inventory level that triggers a new order. It helps prevent stockouts by ensuring sufficient inventory is available to meet demand, while also minimizing overstocking and the associated costs of holding excess inventory.</p> Signup and view all the answers

<p>Investment decisions involve allocating excess funds to various investment opportunities to generate returns and meet future expenses. These decisions are crucial for aligning investment strategies with the company's financial needs, ensuring sufficient capital for future growth and expansion.</p> Signup and view all the answers

<p>The Money Market involves short-term debt securities with maturities of less than one year, such as treasury bills and commercial paper, used for short-term liquidity management. The Capital Market involves long-term debt and equity securities, such as stocks and bonds, used for longer-term investment and financing.</p> Signup and view all the answers

<p>Financial services encompass a range of activities offered by institutions like banks, insurance companies, and investment firms to help individuals and businesses manage their finances, make investment decisions, and access capital. Their expertise and resources facilitate financial planning, lending, saving, and investment strategies, providing crucial support for economic growth and stability.</p> Signup and view all the answers

A method of managing money through circulation, credit, investment, and banking.

The concept that money received sooner is more valuable than money received later.

The principle that less risky assets are usually more valuable than riskier ones.

The study of financial decisions made by firms regarding cash flow and investments.

The process of ordering and controlling stock to avoid over or understocking.

Strategically overseeing cash flow to ensure funds are available as needed.

The process of allocating excess funds based on matching investments to expenses.

Platforms where financial assets are traded, including banks and stock markets.