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INDIAN
SCHOOL OF BUSINESS
MANAGEMENT
& ADMINISTRATION
AN ISO 9001
: 2008 CERTIFIED INSTITUTION
SUBJECT:- CORPORATE FINANCE MANAGEMENT
N.B.: 1) Attempt any Twenty
Questions
2) All questions carries equal
marks.
Q.1) Give A brief On Optimizing the
Corporate Finance Function, The ExternalBusiness Environment and Corporate
Financial Strategy.The Strategic Logic of High Growth?
Answer:Optimizing the Corporate
Finance Function:Considering
the demands on finance functions and current opportunities for improvement,
this may be the best time for insurers to revisit their finance operating
models and better prepare their operations for current and future demands.Many
insurance companies are taking a closer look at their business strategy, and
many of them have made or are contemplating
Q.2) Explain what is Shareholder
Value Maximization?
Answer:a) Corporate Valuation:Corporate valuation is a process and
a set of procedures used to estimate the economic value of an owner’s interest
in a business. Valuation is used by financial market participants to determine
the price they are willing to pay or receive to affect a sale of a business. In
addition to estimating the selling price of a business, the same valuation
tools are often used by business appraisers to resolve
Q.3) Explain Financial Policy with
the help of the following points?
Answer:The primary aim of the financial policy is to
ensure that all financial transactions comply with the company’s requirements
regarding internal control, financial liability and the management of financial
risks, as well as comply with all legal and financial requirements.
·
Capital Structure:For stock investors that favor companies with good fundamentals, a
strong balance sheet is an important consideration for investing in a company's
stock. The strength of a company' balance sheet can be evaluated by three broad
categories of investment-quality measurements: working capital adequacy, asset
performance and capital structure.
·
Operating Leverage: Using a measure of
Q.4) Give an introduction to Risk
Management include the following?
Answer:Risk management is the identification, assessment,
and prioritization of risks (defined in ISO 31000 as the effect of uncertainty
on objectives) followed by coordinated and economical application of resources
to minimize, monitor, and control the probability and/or impact of unfortunate
events or to maximize the realization of opportunities. Risk management’s
objective is to assure uncertainty does not deviate the
Q.5) what is Financial Reporting,
Planning and Control
Answer:a) Financial Reporting: GAAP
Convergence:The international convergence of accounting standards
refers to the goal of establishing a single set of high-quality accounting
standards to be used internationally, and the efforts of standard-setters
towards achieving that goal. Convergence is taking place in various countries,
with over 100 countries having made public commitments supporting convergence
towards the International Financial Reporting Standards (IFRS).Efforts towards
convergence include projects that aim to improve the respective accounting
standards, and those that aim to reduce the differences
Q.6) Corporate Performance
Management: The Balancing act?
Answer:Business performance management is a set of
management and analytic processes that enables the management of an
organization's performance to achieve one or more pre-selected goals. Synonyms
for "business performance management" include "corporate
performance management (CPM)" and "enterprise performance
management"
a) The Execution Problem:This means that the
Q.7) How do we create and measure
shareholder value creation?
Answer:When an investment or a commitment is made in
the form of money, effort or time, a certain degree of utility or benefit is
demanded. There is value creation when the actual utility is greater than the
utility that was demanded, and there is value erosion when the actual utility
is less.
There is a wide variety of equity
investment opportunities available to an investor, ranging from infrastructure
to consumer goods and from
Q.8) How do we manage financial risk?
Answer:Financial investing is a common way businesses
and individuals generate passive income streams. Investing money can be done
through a wide variety of investment instruments. Stocks, bonds, derivatives,
mutual funds, money markets and other items are just a few types of available
investments. All investments involve some type of risk, albeit certain
investments are less risky than others. Properly managing risk can ensure
businesses and individuals generate income and do not lose their capital on
unwise choices.
Q.9) In what projects are we going
to invest our shareholders money (capex)?
Answer:Capital expenditure, or CapEx, are funds used
by a company to acquire or upgrade physical assets such as property, industrial
buildings or equipment. It is often used to undertake new projects or
investments by the firm. This type of outlay is also made by companies to
maintain or increase the scope of their operations. These expenditures can
include everything from repairing a roof to building, to purchasing a piece of
a equipment, or building a brand new factory.
In terms of accounting, an expense
is considered to
Q.10) Why Profit maximization is not
the same as shareholder wealth maximization?
Answer:The objective of financial management is profit
maximisation. It cannot be the sole objective of a company as there is a
directs/relationship between risk and profit. If profit maximisation is the
only goal, then risk factories ignored.
Sometimes, higher the risk, higher
is the possibility of profits. Hence, risk has to be balanced with the
objective of profit maximisation. In addition, a firm has to take into account
the social considerations, and normal obligations to the interests of workers,
consumers, society, government, as well as ethical trade practices. However, as
profit
Q.11) What investments should we
make?
Answer:Investing is all about buying things that put
money back into your pocket. It may sound scary, but if you have a bank term
deposit or are in KiwiSaver – you’re an investor.
You become an investor when you put
your money into things that can earn income or grow in value. The general aim
is to earn at least an after-tax return greater than the rate of inflation.
Being an investor also involves a degree of risk. Generally, the higher the
Q.12) How do you know whether an
investment generates value for shareholders?
Answer:Your business is an asset and, as such, has
inherent value. Determining what that value is, and more importantly, how to
increase that value, are key aspects of financial management that are too often
ignored. Most business owners look first at the P&L, or how much money they
“pulled out”, and the balance sheet second. Few look at their shareholder value
and know how much their business is worth. What is interesting is that almost
all, however, will be able to tell you the current value of their real estate
or stock portfolio. Conceptually, most people understand “shareholder value”.
Implementing the principle and using the
Q.13) Described Traditional
appraisal techniques?
Answer:What businesses actually use: Each method of
performance appraisal has its strengths and weaknesses may be suitable for one
organisation and non-suitable for another one. As such, there is no single
appraisal method accepted and used by all organisations to measure their
employees’ performance.
All the methods of appraisal devised
so far have been classified differently by different authors. While traditional
methods lay emphasis on the
Q.14) Explain The managerial art of
investment selection
Answer:Building and managing an investment portfolio
is a bit like building a piece of furniture. If you are creating something
extremely simple, you don’t need more than a small set of basic-purpose tools.
Constructing something better calls for selecting the right wood, the right
tools, and the right technique. Similarly, building the best portfolios calls
for selecting the best investment vehicles.The single most important aspect of
selecting a money manager is the Investment Selection Process. WWK’s Investment
Selection Process
Q.15) Explain The stages of
investment decisions ?
Answer:Where corporate investing is concerned, there
are basically four phases that include a planning phase, an evaluation of the
project or capital, a way for status to be monitored, and a post completion
report or review process. To evaluate a capital investment project, each phase
must be addressed. For example, an analysis must be done on the strategies
being utilized or proposed for funding and financing. Capital expenditures are
estimated according to whether they are major projects or minor projects, as
well as future capital investment needs proposed.
Q.16) Explain Allowing for risk
Answer:What is risk?:Risk is the potential of losing
something of value. Values (such as physical health, social status, emotional
well being or financial wealth) can be gained or lost when taking risk
resulting from a given action, activity and/or inaction, foreseen or unforeseen.
Risk can also be defined as the intentional interaction with uncertainty.
Uncertainty is a potential, unpredictable, unmeasurable and uncontrollable
outcome, risk is a consequence of action taken in spite of uncertainty.
Adjusting for risk through the
discount rate: An
esti
Q.17) Explain Value managed
companies versus earnings managed companies
Answer:The value of a
company is determined by its discounted future cash flows. Value is created
only when companies invest capital at returns that exceed the cost of that
capital. VBM extends these concepts by focusing on how companies use them to
make both major strategic and everyday operating decisions. Properly executed,
it is an approach to management that aligns a company's overall aspirations, analytical
techniques, and management processes to focus management decision making on the
key drivers of value. While on the other hand the earnings management is a strategy used by the
management of a company to deliberately manipulate the company's earnings so
that the figures match a pre-determined target
Q.18 ) Explain Strategic position
Answer:
·
Strategic business unit management:A strategic business unit is a fully
functional and distinct unit of the business that develops their own strategic vision
and direction. Within large companies there are smaller specialized divisions
that work towards specific projects and goals, and we see this organizational
setup frequently in global companies. The strategic business unit, often
referred to as an SBU, remains an important component of the company and must
report back through
Q.19) Explain Value creation within
strategic business units
Answer:Value creation is the primary aim of any
business entity. Creating value for customers helps sell products and services,
while creating value for shareholders, in the form of increases in stock price,
insures the future availability of investment capital to fund operations. From
a financial perspective, value is said to be created when a business earns
revenue (or a return on capital) that exceeds expenses (or the cost of
capital). But some analysts insist on a broader definition of "value
creation" that can be considered separate from traditional financial
measures. "Traditional methods of assessing organizational performance are
no
Q.20) What is the companies cost of
capital?
Answer:
·
The required rate of return: Investors use the RRR to decide where to put
their money. They compare the return of an investment to all other available
options, taking the risk-free rate of return, inflation and liquidity into
consideration in their calculation.
·
The
cost of equity capital: The cost of equity can be a bit tricky to calculate as
share capital carries no "explicit" cost. Unlike debt, which the
Q.21) explain the below Mergers:
impulse, regret and success
Answer:
·
The merger decision:In a successful merger, both organizations come to the table as equals
with strengths and weaknesses. One organization is not pursuing the other. People bring an inherent tendency to
characterize behaviors of others as “protectionist” or “driven by turf.” My
experience has been, however, that what one person perceives as turf, another
person interprets as important and good. Members should discuss the necessity
of relying on each other’s different abilities, understanding,
Q.22) Do the shareholders of acquiring
firms gain from mergers?
Answer:Numerous studies examine the financial impact
of mergers on shareholder wealth. All find target firm shareholders recording
large gains but few uncover gains accruing to stockholders of acquiring firms.
Equally puzzling, many studies show acquiring firm share prices falling for up
to three years after consolidation, a result largely inconsistent with
expectations that mergers raise profitability.
Some economists claim the existing
economic and legislative environment prevents acquiring firm shareholders from
earning large takeover gains.
Q.23) What pay-outs should we make
to shareholders?
Answer:A number of leading companies have adopted the sensible
approach of regularly returning to shareholders all unneeded cash and using
share repurchases to make up the difference between the total payout and
dividends. While these companies don’t have formal published policies, you can
deduce them from actual practice. Share repurchases offer companies more
flexibility to hold onto cash for unexpected investment opportunities or shifts
in a volatile economic environment. In contrast, companies that pay dividends
enjoy less flexibility because investors have been conditioned to expect cuts
in them only in the most dire circumstances. Thus, managers should employ
dividends only when they are certain they
Dear students get fully solved
assignments
Send your semester &
Specialization name to our mail id :
“ help.mbaassignments@gmail.com ”
or
Call us at : 08263069601
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