The questions to be answered are; Week 1What are the five basis principles of finance? Briefly explain them (no more than 250 words). (10 marks)Week 2Little Book LTD has total assets of $860,000....

1 answer below »

View more »
Answered Same DayMay 13, 2021HI5002

Answer To: The questions to be answered are; Week 1What are the five basis principles of finance? Briefly...

Neenisha answered on May 14 2021
143 Votes
WEEK 1
There are 5 basic principals in Finance which are necessary to understand Finance.
1. Principles of Risk and Returns
Any risk which an investor is taking should be
because of the reward which investor will get for taking that risk. This Principles state that for every risk there should be a reward for the risk taker because investors want to get compensation for the risk involved. Higher the risk higher the returns.
2. Time Value of Money
It is rightly said that any dollar received today carries more worth than the dollar received tomorrow. Companies delay incurring the cost of project to get higher net present value that is the value at present. We receive interest on the money deposited as it is better to get the money today than in future.
3. Cash Flow Principle
Cash flow and Accounting Profit differs. They need not be same figures. Accounting profit is the difference between total income and total expenses of the company. However, Cash flows consider only the cash inflow and outflow. These cash flows are used in determining the value of firm and relevance of the project.
4. Financial Markets are efficient
The markets reflect full information at any given time. Therefore, any change will get reflected in market and thus market is efficient. Although there are still many inefficiencies present in the market.
5. Principles of Diversity
The risks on the investments can be reduced with the help of diversification. Diversification of investments means including the stocks with low or negative correlation to diversify the risk
WEEK 2
    Total Assets
     $ 8,60,000
    Outstanding Shares
     $ 75,000
    Book Value
     $ 7,50,000
    Market Value Per Share
     $ 12...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here
April
January
February
March
April
May
June
July
August
September
October
November
December
2025
2025
2026
2027
SunMonTueWedThuFriSat
30
31
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
2
3
00:00
00:30
01:00
01:30
02:00
02:30
03:00
03:30
04:00
04:30
05:00
05:30
06:00
06:30
07:00
07:30
08:00
08:30
09:00
09:30
10:00
10:30
11:00
11:30
12:00
12:30
13:00
13:30
14:00
14:30
15:00
15:30
16:00
16:30
17:00
17:30
18:00
18:30
19:00
19:30
20:00
20:30
21:00
21:30
22:00
22:30
23:00
23:30