Finance Fundamentals
This term refers to the management of money and financial resources of a business.
What is Finance?
This is considered the primary objective of corporate finance.
What is wealth maximization?
These are the three core decisions taken by a finance manager.
What are investment, financing, and dividend decisions?
This principle states that a rupee today is worth more than a rupee tomorrow.
What is the Time Value of Money?
This process evaluates long-term investment proposals.
What is Capital Budgeting?
This explains why finance is called the lifeblood of a business.
Why is finance essential for business operations?
This explains why wealth maximization is superior to profit maximization.
Why does wealth maximization consider risk and time value?
This explains why investment decisions are the most critical.
Why do investment decisions involve long-term commitment and risk?
This explains why future cash flows are discounted.
Why is money earning capacity considered?
This explains why NPV is preferred over Payback Period.
Why does NPV consider time value and total cash flows?
Planning funds for expansion or a new plant reflects this finance function.
What is financial planning?
Selecting projects that increase share price reflects this objective.
What is shareholder wealth maximization?
Choosing between debt and equity reflects this decision.
What is the financing decision?
This value is calculated when money grows at compound interest.
What is Future Value?
This method is used when capital is limited.
What is the Profitability Index method?
This distinguishes finance from accounting in terms of focus and orientation.
What is future-oriented decision making?
This problem arises due to separation of ownership and control.
What is the agency problem?
This decision affects firm risk, return, and cost of capital.
What is the capital structure decision?
This helps compare money received at different points in time.
What is Present Value analysis?
This conflict arises when NPV and IRR give different rankings.
What is the ranking conflict problem?
This explains why finance becomes more important than marketing during a crisis.
Why is liquidity and cash management critical?
This justifies shareholder wealth maximization as socially optimal.
Why does efficient capital allocation benefit society?
This decision balances growth expectations and liquidity.
What is the dividend decision?
This justifies accepting a lower future amount over a higher nominal amount.
Why does risk and discount rate matter?
This method is best for mutually exclusive projects.
What is the NPV method?