D076 WGU Finance Skills for Managers AQA

Finance vs. Accounting - finance is forward looking accounting is backward looking Accounting - recording, reporting, and summarizing past financial information and transactions finance - management and allocation of capital (money) 3 primary areas of finance - business finance investments financial institutions business of finance - deals with sources of funding Capital Structure - the mixture of debt and equity used to finance a firm Asset Pricing - The process of valuing assets. current market value - What someone would pay right now for an asset. Which area of finance deals with sources of funding and capital structure of corporations and seeks to increase the value of a firm to its owners? - business finance Utility - total satisfaction received from consuming goods and services Goal of a financial manager? - to maximize the wealth of the owners, the stockholders What is the primary aim of personal finance goals? - To maximize satisfaction from products purchased and services obtained What should be the main question a firm asks when considering any investment decision? - Do the benefits of this investment outweigh the costs? What is the primary goal of the financial manager of a firm? - To maximize owner wealth Three main tasks that a financial manager of a firm does in order to achieve the goal of the firm, which is to maximize shareholder wealth. - making investment decisions, making financing decisions, and managing working capital. Cash Management - Managing the day-to-day finance operations of a firm. Financial Policy Implementation - Incorporating new finance ideas within a firm. venture capitalists - make large investments in new ventures in return for an equity stake in the business IPO (initial public offering) - The first time a company sells shares of its stock to the public. credit analyst - A bank position which involves deciding who qualifies for a loan and who does not. Which financial career focuses on investing capital into firms whose shares are not currently sold on any public stock exchange? - Private Equity Which task does a financial manager perform when assessing the costs and benefits of potential projects? - Making investment decisions Which task does a financial manager perform when choosing to obtain a loan to purchase a piece of equipment for a new project? - Making Financing decisions What tool can you use to understand your overall personal cash flows? - Budgeting What is a reasonable alternative to keeping an emergency stash of cash? - Investing in a Savings account You want to buy a house, so you obtain a mortgage for which you can afford the monthly payments. What process have you engaged in as part of your financial decision making? - Financing What area of finance involves deciding which assets to invest in to create wealth in the future? - Investments Hannah is the financial manager of a firm. A project that she has recommended has been approved and will cost $5 million. Since the company does not have enough cash on reserve, Hannah must figure out how to raise enough money to start the project. She can choose whether to issue new bonds, new stocks, a mortgage loan, or some combination of those options. What task is Hannah performing in this scenario? - Making a financing decision Maria and Mateo are setting financial goals. They decide that they need to save $200 each month to reach their goal of taking their children to visit their grandparents in Spain next summer. What is the objective of setting such a goal? - To maximize individual utility Which professional works with individuals to help them achieve their financial goals? - Financial Planner Omar is about to purchase a new car for $30,000. He knows he wants to buy the car, but he is still trying to decide how to pay for it. He has barely over $30,000 in his bank account. He can either take out an auto loan from a bank or use a mix of cash and an auto loan. In this scenario, what is Omar doing? - Financing a goal Treasury Security - bonds issued by the US government Corporate Bonds - issued by corporations to borrow money from the public to cover the costs of investment in new projects. stock - A share of ownership in a company money market - a market in which money is lent for periods of one year or less capital market - market in which money is lent for periods longer than a year primary market - FIRST TIME securities are sold to investors syndicate - a group that is temporarily formed to handle a bond or stock issue. Initial Public Offering (IPO) - the first time a company issues stock that may be bought by the general public