125230 Business Finance and Financial Decisions

125230 Business Finance and Financial Decisions

Task:

1. Describe key finance goals and decisions and the environment in which financial decisions are made.
2. Identify and assess ethical issues with respect to financial theory and practice.
3. Apply time value of money, valuation, and risk and return techniques to financial decision-making.
4. Evaluate project and firm cost of capital and demonstrate its application to financial decisions.
5. Analyse how sound financial management techniques are used to evaluate long and short term investment decisions.
6. Identify and evaluate alternative financing and dividend decisions.
Recall the Different Business Finance Decisions
• Investment Decision (What do we invest in?)
• What projects should we invest in?
• Impacts on internally generated funds available for financing and dividends
• Dividend Decision (How much to pay the owners?)
• How much do we pay shareholders?
• Impacts on free cash flows available for investing and debt repayments
• Financing Decision (How do we finance our investments?)
• What is our target capital structure?
• Impacts on WACC which in turn impacts on the investment decision
• Dividends are the key return variable from which owners and investors determine share value.
• Dividends are redistributions from earnings.
• Dividend growth tends to lag behind earnings growth for most corporations.
• Dividend policy is one of the factors that drives an investor’s decision to purchase a stock, therefore, it can be seen that many companies use their dividend policies to provide information to investors.
• Cash Dividend Payment Procedures
• Date of Record (Dividends)
• Set by the firm’s directors, the date on which all persons whose names are recorded as stockholders receive a declared dividend at a specified future time
• Ex Dividend
• A period usually beginning 2 business days prior to the date of record, during which a stock is sold without the right to receive the current
dividend
• Payment Date
• Set by the firm’s directors, the actual date on which the firm mails the dividend payment to the holders of record
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