Financial management Objectives: capital gain and dividend

Shareholder return

Agency relationship

Corporate governance

Cum dividend

Ex dividend 

Earnings per share

Ecomony

Effectiveness

Efficiency

Goal congruence

Financial management enviroment:

Macroeconomic:

-Ensuring minimum amounts of price increases

-Increasing national income and living standards

-Ensuring a balanced ratio of imports to exports

-Ensuring a stable and fully employed labour force

Microeconomic:

Disintermidiation

Eurobond

Fiscal policy:

-Balancing government spending with tax receipts

Moneytary policy:
-Maintaining interest rates at minimum levels

Working capital 

Non-recourse factoring charge of bad debt

overtrading

Management working capital

Cash flowforecast

Working capital finance

Working capital finance

Investment decision

IRR

Investment appraisal using DCF

Allowing for tax and inflation

Nominal:after adjusting for the impact of expected inflation

Real:Current price

Project appraisal and risk

Joint probability

Risk

Sensitivity analysis

Uncertainty

Specific investment decision

Capital rationing

Divisible projects

Equivalent annual benefit

Equivalent annual cost

Leasing

No-divisible project

Sensitivity analysis

Sources of finance

Conversion premium

Convertibale loan notes

Cum rights price 

Theoretical ex-right price

Dividend policy

Scrip dividend:

Practical capital structure issues

The cost of capital

Beta factors

Market risk premium(equity risk premium)

Systematic risk (or market) risk

Unsystematic risk(speciffic risk)

Price = Dividend x dividend cover x price earnings ratio

dividend cover=dividend / earings

Capital structure theories

Arbitrage

Asset beta: An ungeared beta measures only business risk

Equity beta: A measure of the systematic risk of a share, including business risk and financial risk

Capital structure

Business valuation

Market capitalisation

Takeover

The efficient market hypothesis

Market efficiency

-In weak-form efficient market,Share prices fully and fairly represent past information.Share prices appear to follow a 'random walk'

-In a semi-strong form efficient market the markets value shares based on information relevant to past movements and also published information.

-In a strong form efficient market the share price reflects historic information, published information and insider information.The share price will already reflect the NPVs of both new products as the decision to launch them was taken two days ago. Share prices fully and fairly represent private information

Foreign currency risk

Currency futures

Current options

Ecomonic risk

Forward contract

Netting

Spread:shows the different rates at which a bank will transact with an exporter and an importer in order to make a profit, a bank sells dollars, the docmestic currency, to an exporter and a higher price (15 pe and buys dollars from an importer at a low price 13 pesos and make a profit on the spread, that it is the difference between 15 and 13

-Translation risk is the gain/loss arising from the retranslation of a foreign subsidiary's results.

Interest rate risk

Forward rate agreement

Interest rate futures

Interest rate option

Interest rate swap

An over-the-counter option is an agreement with a financial institution and an immediate premium is payable on taking out the option. However, it cannot be traded and it is only exercised if actual interest rates are less favourable.