WRITE IN YOUR OWN WORDS

WRITE EACH OF THE 5 TABS IN YOUR OWN WORDS

-Chapter 8 goes over the payback rule and the accounting rates of return that the finance department would have to consider before investing any capital. In this chapter one learns about the profitable index and the relation it has to NPV, the NPV is very crucial to a company because they can estimate the expected future cash flow for the years following. This enables a company to know how long they will have to invest or know how long it will take for their investment to generate any type of return.

- Ch.12  goes over the cost of equity, debt and preferred stock. With the cost of equity investors can decide wether to place their money in a company or not and it assess the risk that comes with the investment through the firms cash flow. With the cost of debt and stock the firm can see where it needs to cut cost or for how much to issue stocks for. With these tools a firm can raise capital if need be via bonds or corporate stocks.

-There are several cash flows that are important for an investment, like the project cash flow, operating cash flow, net working capital etc. They give information about the company's value, liquidity and solvency, and the situation. Without positive cash flow, a company cannot meet its financial obligations. The cash flows tell you how much cash went into and out of a company during a specific period such as a quarter or a year. The possibility of error in projected cash flows is called forecasting risk. This concept is very important because most of the time  manager think positive about the projects, but sometimes the future cash flows can be negatives.

-In this chapter explain different kind concepts which are very interesting and important for any business. One of these important and interesting concepts is the Portfolio that represents for a business a strong union as assets. The principal objective to this is to maintain the weights according to invest. In other words, the portfolio is like another asset representing the company as a big portion. It is where accumulated all the potential that they can do as an investor. In my personal opinion, it is an important asset in the financier’s world.

-In this chapter it is about leverage and capital structure thus capital structure is that debt/equity mix that simultaneously maximizes the value of the business, minimizes the weighted average cost of capital, and maximizes the market value of the common stock. Homemade leverage have equal access to the capital markets.  Of course there is always two types of risks business and financial risk which business risk is the risk inherenet in a firms operations and dpeneds on the risk f the firms assets while financial risk is the extra risk to stockholders that results from debt financiing.