In finance and our previous post, we often talk about risk management, when it is understood that we are talking about financial risk management. Risk managers are found in a…
Before we can begin to describe what is financial risk managers do, we need to understand what financial risk is. In finance, the risk arises from uncertainty surrounding future profits…
Financial risk is often divided into four principal types of risk: market risk, credit risk, liquidity risk, and operational risk. To varying degrees, most financial transactions involve aspects of all…
The traditional financing is related to the liability side of the balance sheet. The firm issues long term debt or equity to meet its financing needs. and in the process,…
Dividend policy means a policy to determine what proportion of earning is paid to shareholders by way of dividend and what proportion is retained in the firm for reinvestment purposes.…
The dividend policy decision involves the choice between distributing the profits belonging to the shareholders and profits retention by the firm. A dividend means, the portion of company net income…
The agency problem is pervasive in our society. It is not just evident in business. It also exists in clubs, government agencies, churches, and many other types of organizations. Types…
To reduce agency problems and contribute to the maximization of owners’ wealth, stockholders load agency costs. Agency costs are defined as those costs borne by shareholders to encourage managers to…
The goal of the financial manager should be to maximize the wealth of the firm’s owners. Thus managers can be observed as agents of the owners who have hired them…
The nature of financial decisions varies from one firm to the other. It may also be different from the same firm over a period of time. The reason is that…
The forceful argument of Milton Friedman, many business firms in practice contribute to various social causes. They give a donation to hospitals and educational institutions. Contribute to relief programmers, sponsor…
A Financial manager organizes and manages an organization’s or an individual’s financial portfolio. They also make financial reports, supervise investments and help with cash management. So, a financial manager is…