1.Write the short answer for the following
2.What is meant by financial management?
3.What are the tools of financial analysis? What is the advantage of one over others?
4.What is time value of money?
5.What is the relevance of determining cost of capitals to firms?
6.How do you understand capital budgeting decision?
1. Financial management refers to the process of planning, organizing, and controlling a firm's financial resources to achieve its goals and objectives.
2. Financial analysis tools include ratio analysis, trend analysis, and cash flow analysis. Each tool has its advantages, with ratio analysis providing a quick overall assessment of a company's financial health, trend analysis showing patterns over time, and cash flow analysis highlighting the flow of cash within a company.
3. Time value of money refers to the concept that a dollar received today is worth more than a dollar received in the future, due to the potential for earning interest or investment returns on the current dollar.
4. Determining the cost of capital is essential for firms as it helps them evaluate the profitability of potential investments and decide whether to proceed with them. It also aids in setting appropriate pricing for products and services and in determining the optimal capital structure of a company.
6. Capital budgeting decisions involve analyzing and evaluating potential long-term investment projects to determine their feasibility and potential profitability. It is a crucial decision-making process, as it helps allocate limited resources to the most productive investment opportunities for the firm.