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Although many business students see finance as it is portrayed in the movie Wall Street, the study of finance is much more than learning to be a young high-power stock trader or greedy corporate raider. For one, finance impacts everyone on a day-to-day basis. Whether you are getting your first mortgage or credit card, buying life insurance, or planning for retirement, most people are faced with financial decisions that play a very important role in their lives. Furthermore, the majority of careers in finance are not in financial markets; rather, business students who study finance are in high demand in financial services and corporate finance. While the study of finance helps prepare business students for a career in one of these three fields, financial information is often relevant in personal and business decision-making, and understanding how to prepare and use financial information is important for both individuals and all business students a like. 

1. Financial Markets: The goal of efficient financial markets is to ensure that capital goes where it is needed. Imagine a company needed to borrow one million dollars for a new project. Before, owners of the company would use personal networks to either secure government loans or grants or to procure new investors. Today, while many companies still raise money this way, they now have another option: financial markets. Financial markets are simply a platform which savers and investors are connected with borrowers - individuals and companies who need capital. Borrowers can raise money by appealing to a larger selection of investors, and savers have a wide range of investments to choose from. Financial markets are supported by financial institutions, intermediaries such as banks, who take individual, government and corporate savings and then trade or lend these funds out in exchange for financial securities such as stocks or bonds (which represent ownership or a promise to repay). 

2. Financial Services: Financial services institutions include banks, trust companies, investment dealers and brokers, financial planners, mutual fund companies, life and property insurance companies, mortgage brokers and real estate companies. These institutions are overseen by regulators such as the Securities and Exchange Commission and involve the participation of professional bodies such as Chartered Accountants, Chartered Financial Analysts and Lawyers. This branch of finance looks at how financial products are designed and delivered to individuals, businesses and governments. For example, a bank may take personal savings in the form of deposits from its over-the-counter bankers and use these savings to provide you a mortgage for your house. 

3. Corporate Finance: Finance plays an important role in both the day to day and long-term decision-making in a business. Daily financial activities include ensuring enough cash is on hand to maintain operations. This includes decisions such as extending credit, collecting receivables, buying inventory and paying suppliers. Long-term financial activities include capital budgeting as well as planning and forecasting the business's need for cash and financing. Preparing and using this financial information is the job of a financial manager. Financial managers look to make decisions that maximize the value of the firm to its shareholders. This distinction is important. While there exist many financial goals in organizations (such as maximizing sales or profits) maximizing the firm's value to shareholders should be the overarching goal of any successful financial manager. Today, because of the paramount role that financial managers play in decision-making, we see many CEOs and top executives in corporation coming from careers in financial management. 


Categories within Finance

The Time Value of Money

Postings: 1,015

The general concept of time value of money relies on the fact that the value of a dollar today is worth more than the value of a dollar in the future. We use time value of money concepts to compare the value of cash flows received at different times.


Postings: 724

Annuities are periodic, fixed payments over a period of time. Present and future values are used in annuity calculations.

The Discounted Cash Flows Model

Postings: 472

Investors will buy shares in a company when they believe they will receive a return on their investment, either in the form of dividends (that is, regular cash distributions of a corporation's profits) or an appreciation in the value of the stock (that is, they can sell the stock for more tomorrow than they would today). We use the dividend discount model and comparative models to value securities. See also: Financial Statement Analysis.

Arbitrage Pricing Theory (APT)

Postings: 77

The arbitrage pricing theory looks at how a security’s return is related to its risk. However, the arbitrage pricing theory looks at different factors that contribute to a securities risk. These factors may be systematic, such as interest rates, or unsystematic, such as the success or failure of a company’s research and development.

Capital Structure and Firm Value

Postings: 373

We look at theories such as Modigliani and Miller (M&M) Proposition I and II to explain how a firm's capital structure and tax shield from debt affect firm value; and how leverage affects the risk and return of a firm's stock.

Dividends, Stock Repurchase and Policy

Postings: 421

A corporation's earnings may be paid out as dividends to shareholders instead of kept as retained earnings. Corporations may also use extra cash on hand to repurchase its own stock. Paying dividends, unlike repurchasing stock, reduces the value of a share by the amount of the dividend on the ex-dividend date.

Issuing Equity

Postings: 464

As a company grows, its growth prospects will likely require additional financing. For many companies, raising new capital can be done by issuing more common stock. A company's first issue of common stock to the public is called an Initial Public Offering. Afterword, a corporation may issue new equity at any time in order to finance its growth. When new common shares are offered to existing shareholders first, this is called a rights offering.

Bond Valuation

Postings: 1,641

Bonds are a type of security; in essence, bonds are a corporation's promise to pay a specified amount at a future date. Investors buy bonds at an amount equal to the present value of this future payment (or the sum of the discounted future payments expected from the bond). They do this in order to earn interest from the purchase of the bond. By knowing the interest rate investors expect to return on the purchase of a corporate bond, we can calculate the price they would be willing to pay.


Postings: 648

Many assets such as buildings, machinery and other equipment, may be leased or purchased outright. Lease vs. buy decisions are important financing decisions for businesses looking to acquire a new asset.


Postings: 1,380

Derivatives are contracts that involve underlying assets and can be used for hedging the risk associated with the prices of these assets. Hedging risk plays an important role in driving the popularity of financial derivatives. As well, derivatives play a key role in supporting standardized and transparent trading of commodities in financial markets.

Credit Management: Credit Policy, Analysis and Risk

Postings: 173

Accounts receivables make up somewhere over 15 percent of all assets held by firms. As a result, decisions that affect how a company extends credit to consumers (consumer credit) and other firms (trade credit) have a significant impact on the financing activities of the firm.

Mergers and Acquisitions

Postings: 468

There are three different legal variations of a merger and acquisition: merger/consolidation, acquisition of stock and acquisition of assets. Mergers often occur because of the synergy that can be created when two companies integrate their operations. Company takeovers can also occur as a result of proxy battles and leveraged buyouts.

Financial Distress and Bankruptcy

Postings: 185

Although debt provides a tax shield that increases the value of a firm, the use of debt is limited by what we call financial distress costs. Financial distress occurs when a firm has difficulty meeting its financial obligations. A firm may default on its interest payments, become insolvent, stop investing, restructure, and/or file for bankruptcy.

Valuing Securities using Accounting Information

Postings: 195

The fundamental value of a firm is based on its earnings. As analysts and financial managers, we use accounting concepts to better understand a firm’s earnings to evaluate where a company is doing well, where it can focus on improving, and how much growth and future earnings we can expect. Growth rates determined through a comprehensive analysis of a firm’s financial statements can be used to value the firm’s securities.

Share price and investment decisions of Zeus Solutions

Zeus Solutions (ZS), an online advertising company, expects next year's after tax earnings to be $20 per share. Its business is still expanding. It plows back 80% of its earnings. The ROE on its new investments is 15%. Its cost of capital is 12.5%. (a) What is the share price of Zeus Solutions? What is its PVGO (Present Value

Amortization Schedule Computations

John Gunho wants to purchase a condominium, he will be taking out a mortgage for the condo. The purchase price for the condo is $42,000 at an annual rate of 7.2%. He reviewed his options for the term, and he knows the effects of compounding interest, so he plans to take a one year term mortgage. (1) Create an amortization sch

Orange County Health: Expected Dividend, Stock Price, P/E Ratio

Orange County Health, a health service company, is expected to generate $1 in earnings per share next year and in the years to follow, from its existing assets. It plans to announce a new program to expand its business. This new program will increase its plow back ratio from zero to 50% next year. The return on equity for the ne

TVM, Share Price, CAPM Questions

1) What is the holding period return (percentage return on this investment) to an investor who bought 100 shares of Charter Oil nine months ago for $36 a share, received two $50 dividend checks, and sold the stock today at $38 a share? 2) What is the market price of a share of stock for a firm that pays dividends of $1.20 per

Stocks and Averages in Excel

Hi I'm having some issues with the numbers below. I'm using Excel to complete all problems 1-15 however I only need help on the ones below. 1. You buy a stock for $20. After a year the price rises to $25 but falls back to $20 at the end of the second year. What was the average percentage return and what was the true annualiz

Capital Structure and Dividends: Bed, Bath and Beyond Stock

Please take a look at Bed Bath and Beyond's stock prices here and help me answer the following questions: https://finance.yahoo.com/quote/BBBY?p=BBBY Please review the company's dividends over the past three years. Then, answer the following questions in Word (except for the Excel portion specifically noted): What has oc

Steel mill production planning

A steel mill produces two types of steel alloy: boral and chromal. Production of each alloy requires three processes: Box anneal, Cold Roll, and Strand anneal. Production capacities are: Box anneal: 4,000 hours/month Cold Roll: 500 hours/month Strand anneal: 1,000 hours/month Production rates in tons per hour are: Box anne

Simulation model to evaluate car purchase vs lease option

An advertisement in the newspaper offers a new car for sale or lease. The purchase price of the car is $43,240, or the car can be leased for 24 months for a monthly payment of $458, with a $7,500 down-payment. Under the lease option, there is a charge of 24 cents/mile for mileage above 30,000 miles for the 24 months, and a $550

Simulation-Dice Rolls in Excel

Develop two simulation models of tossing two six-sided dice (numbered 1 through 6 on the six faces). Model 1: Simulate rolling a single die twice and add the total. Model 2: Simulate a combined roll of two dice, giving a number from 2 through 12 with appropriate probabilities.

Personal Budget Deficit

A. What situations might have created the budget deficit for the Constantine family? B. What amounts would you suggest for the various categories for the family budget? C. Describe additional actions for the Constantine family related to their budget or other money management activities. Adjusting the Budget In a recent m

Career and Financial Planning

Career Decision: Life Situation Single - Age 21 No dependents College student Financial Data Monthly Income $1,750 Living Expenses $1,210 Personal property $7,300 Savings $2,000 Student loan $3,000 Credit card debt $2,400 Shelby Johnson's current employment position, a grooming specialist for a local pet store, p

Financial Planning: Personal

Situation 1: Fran and Ed Blake, ages 43 and 47, have a daughter who is completing her first year of college and a son three years younger. Currently, they have $42,000 in savings and investment funds set aside for their children's education. With increasing education costs, they are concerned whether this amount is adequate. In

Capital Vs. Revenue Expenditure

Explain the difference between a capital expenditure and a revenue expenditure. Also, give an example of each and explain the difference in the method of accounting for each expenditure. Explain if there are times that it would be in management's best interest to "shift" an expenditure from a capital expenditure to a revenue exp

Ethics of Minimum Wage

What are the ethical implications of federal minimum wage? Who does it help, and who does it harm? Does raising the current level of the minimum wage increase unemployment, drive business away, or harm the very poor? Will a higher minimum wage raise the standard of living and buying power of the wage earners? A short paragraph i

Disadvantageous bargaining position

Do you agree that when one enters into a disadvantageous bargaining position because of one's own voluntary acts (such as ignoring a warning) that an otherwise exploiting act becomes morally permissible because the person assumed the risk, or is the act always impermissible because the person is especially disadvantaged? Why, or

Bank reconciliation as an internal control tool

Describe how the bank reconciliation can be used as an internal control tool for cash. Also, should the same person that receives cash payments prepare the bank reconciliation? Give at least one reason to support your answer.

NPV, Payback, IRR discuss compute evaluate recommend

Creating a memo to management including the following: Describe the use of internal rate of return (IRR), net present value (NPV), and the payback method in evaluating project cash flows. Describe the advantages and disadvantages of each method. Calculate the following time value of money problems: If you want to acc

Classify variable and fixed costs, net present value NPV

1) Cost Classification: The Lee's have provided you with the following costs and relevant information that are assumed for year 20XY. Classify the costs as variable costs or fixed costs. Explain the importance of distinguishing between variable and fixed costs. If business is expected to be steady from month to month, provide a

Financial Analysis Explanation

This assignment is designed to teach you how to research a company of your choice. You will be performing an analysis of the financial statements of a publicly traded company. 1. To obtain these financial statements. you will need to access http://www.sec.gov/ 2. Once you are on the SEC website, click on "Company Filings"

The Financial Statements

Describe how the financial statements (the income statement, statement of retained earnings, balance sheet and statement of cash flows) are interrelated. Provide at least two examples. If you were an investor, would you place more emphasis on any one particular financial statement? A short paragraph or at least 5 sentence

Affirmative Action Questions

The U.S. Department of Labor (n.d.) describes affirmative action as shown below: For federal contractors and subcontractors, affirmative action must be taken by covered employers to recruit and advance qualified minorities, women, persons with disabilities, and covered veterans. Affirmative actions include training programs,

The Harvard MBA Oath/Business Ethics

Do you think that taking the (Harvard) MBA Oath positively affects the ability of employees to discharge their ethical duties? Is it useful? If so, in what ways? What would you add to the Oath? Is there anything that concerns you, and why? The answer doesn't have to be long. A one paragraph will be sufficient

Ambush Marketing Structures

Datamonitor. (2010, July). Ambush marketing case study: Successfully leveraging high-profile events to raise brand profile. Then, draft a two-page paper by addressing each of the following items:  In your own words, how would you describe "ambush marketing"? Include two examples with your description.  What are

Business Ethics and Responsibilities

Create a 5- to 6-slide PowerPoint presentation that explores professional ethics and responsibilities. You can use information from the CSU Online Library or other reliable sources. (Note: Websites such as Wikipedia are not acceptable academic sources.) You may use the slide notes function to explain slide contents as necessary.

the topic of the ethics of drug testing in the employment setting.

choose an article within either the ABI/INFORM Collection database or the Business Source Complete database on the topic of the ethics of drug testing in the employment setting. After reading the article, write a 500-word article critique by addressing each of the following items:  Briefly introduce and summarize

Business Ethics Century Perspectives Demand

For this assignment, you will watch a series of short video segments from the film Business Ethics: A 21st-Century Perspective. In combination with the assigned reading, provide a response to the questions that follow. In order to access the video segments, you must first log into the myCSU Student Portal and access the Films On

Portfolio Optimization Techniques

Portfolio Assignment 1. Calculate all of the portfolio statistics: a. Browse through the sheet. There is a vector named Ret. These are the mean returns over the period. We will use these as the proxy expected return for each stock. b. Several lines below this are the correlation matrix and the covariance matrix. The relev

WACC, Beta of Levered & Unlevered, Enterprise Value

Duck Company has the following capital structure. Its corporate tax rate is 35%. Security Book Value Market Value Cost Debt $18 million $20 million 6% Common stock $27 million 50 million 14% Compute WACC ________________% CAMPCO has only one bond issue outstanding. The bonds carry an annual coupon of 8%, mature in