Finance Assignment Help

Finance Assignment Help

What do you understand by the term Finance?

Finance is a core of any business. To start a business, the primary requirement is capital and decision of Capital raising, management of funds, acquiring funds, exchanging of resources all comes under the term Finance.  At Courseworktutors, We provide Finance Assignment Help on all topics of Finance.

The meaning of Finance varies among the business class, students and entrepreneurs.  To help Students to understand the term Finance in a better manner, Courseworktutors.com has differentiated the meaning of Finance in three simplified approach.

As per Entrepreneurs  As per Students As per Experts
Finance is all about arranging the Funds as all business transactions involve Cash directly as well as indirectly. Finance is the management of funds by taking adequate decisions and it helps in utilization of Funds in an effective manner. Finance means providing funds to the Corporates, Individuals, Companies and others in the terms and Conditions which would be favorable for both the parties.

Main Features of Finance

The main features of Finance could be summarized as follows:

  • Internal Control Check
  • Optimal Mix of Funds
  • Decision Making
  • Investment options
  • Types of Finance

Major Concepts of Finance

  • The main concept and aspects of Finance involves, saving money and lending it to the concerned person in a terms which are favorable to both the parties.
  • The most indispensable token for the entire Finance world is money.
  • The term Finance has various deterministic factors such as bonds, debentures, Bank Finance, Loans, overdrafts, third party loans etc. .
  • Investments are primarily known as Financial Assets which are managed effectively for Controlling Financial risk.
  • Three main determinants which are very crucial for Financing are Risk Involved, Time management and Money.

Areas of Finance Topics Covered

As discussed in the topic earlier, Finance is a broad term which involves various money management methods and techniques.  The major areas which are covered in Finance by Coursework tutors are as follows:

In US  the major player for providing public Finance are the Federal Reserve System Banks and in UK , the major player in Bank of England .

Various other Finance topics covered in Finance Assignment Help in Coursework Tutors are as follows
Break Even Analysis Accounting Ratio Balance Sheet Bond Valuation Banking
Financial Statement Analysis Capital Budgeting Capital Structure CAPM Cash Management
Time Value of Money WACC Financial Market Contribution Margin Income Statement
EBIT EBITDA Financial Analysis Operating Leverage Debt Ratio
Managerial Accounting Profit Maximization Financial Management Financial Ratio Analysis Turnover Ratios
Working Capital Mutual Fund Business Risk Business Valuation and Analysis Financial Leverage

Frequently Asked Questions (FAQs)

What is the meaning of the term Portfolio?

The term Portfolio refers to the collection of Asset held by an individual or an Institution for the purpose of Investment. The Assets includes Bonds , Shares , Debentures , Future , option etc.

For Instance : Mr David Johnson holds 3000 shares of Facebook Inc , 1000 Shares of Coca Cola and 2000 shares of Pepsico Holdings . All these 3 Investments Collectively known as Portfolio of Mr David Johnson.

What do your mean by the term Portfolio Management?

The term Portfolio Management may be defined as a process which consist of the following Steps :

  • Construction of Portfolio
  • Revision of Portfolio
  • Evaluation of Portfolio

To Obtain Maximum return depending upon the risk preference of the investors. The process of Portfolio Management Consist of the Following Steps :

  • Specification of Objectives and Constraints
  • Choice of Assets Universe
  • Risk Return Analysis
  • Formulation of an Optimum Portfolio
  • Revision of Portfolio
  • Performance Evaluation of Portfolio
What do you understand by the term Return from Investment and Rate of Return from Investment?

Return from Investment means the Profit or Loss derived from the Investment .

The Formuale for Return from Investment =  Ending Value – Beginning Value

It can be both Positive as well as Negative. In case of Positive value , there is a profit from Investment. In case of Negative Value , there is a loss from Investment.

Rate of Return from Investment calculates the return from Investment in term of Percentage. Formulae for Rate of Return from Investment = {(Ending Value – Beginning Value)/Beginning Value }*100

To Explain the term Return from Investment and Rate of Return from Investment , We have taken help of an Instance :

Say for Example : At the beginning of Year , the Market Price of Share was $100 and during the year the company gave $20 as dividend and Market price of Share at the end of Year was $120.

Return from Investment would be = Ending Value – Beginning Value = $120+$20-$100 = $40

Rate of Return from Investment would be = {(Ending Value – Beginning Value)/Beginning Value} = (140-100/100) = 0.4 or 40%

What do you understand by the term Expected Return from Securities?

The future return from security is always dependent on several factors which could occur in future . To estimate expected return , We use past experience and other Information. Depending on the Pas experience and other information , We assign probability distribution with respect to various possible outcome in the Future. From such probability distribution , We find out the expect value.

For Instance : Let us assume rate of return from a Security can be x1 , x2 and X3 and their respective probabilities are p1, p2 and p3.

Expected Rate of Return would be = p1*x1+p2*X2+p2*x3

Given is the Following Question :

Q1  From the Following Information , Calculate Expected Return of Security-

 

Market Condition

 

Proability

 

Rate of return

Good                          0.3 20%
Normal 0.5 12%
Bad 0.2 4%

 

Solution :

Expected Rate of Return would be =  p1*x1 + p2*x2 + p3*x3 = 0.3*0.20+0.5*0.12+0.2*0.04 =12.8%

What do you understand by the term Risk Free Investment?

An Investment , the return from which is certain is known as Risk Free Investment. Example of Risk free Investment is Government Bonds , Government Debentures etc.

How to measure Risk in case of Finance?

Risk is measured with the help of a Statistics , known as Standard Deviation . Sometimes Risk is measured as Variance , which is square of Standard Deviation . This make no difference as far as comparision is considered.

The Calculation of Risk i.e Standard Deviation can be explained with the help of an example

Let us consider a probability distribution in which total number of Possible Outcome is N.

Their respective probabilities are P1,P2……PN

Their Respective Values are X1,X2………..XN

Expected Value would be = P1*X1+P2*X2+P3*X3…PN*XN

Mean =

Standard Deviation = (Sq Root (P1 (X1-()^2) +(P2 (X2-()^2)………… (P3 (X3-()^2))

What are the types of Risk in portfolio Management?

Risk may be classified in following two Categories :

Systematic Risk : It is the risk arises from external factors or Market factors which are not specific to a particular security. It is that part of risk caused by factors that effect all the securities. As the effect is on all securities , such kind of risk cannot be eliminated through the mechanism of diversification. As a result of which it is also known as Undiversifiable Risk. No Investor can avoid such type of risk. For Instance : Economic and Political Instability adversely affects all the industries and companies.

Unsystematic Risk : This is the risk which represents the fluctuation in return of a security due to factors specific to a particular company and to the market as a whole. An investor can reduce such risks to a considerable extent through the mechanism of diversification. An Unsystematic Risk can be eliminated through the mechanism of diversification , it is also known as Diversifiable Risk.

 

Risk and Return Relationship :

The Systematic Risk is common to all securities but their effect on the securities are not similar. For Example : A company producing luxurious goods such as Lipstick will be more affected by trade depression than those producing essential items like food.

We can also conclude systematic risk of one security need not be same with other securities. Diversification or Non Diversification is a matter of personal choice. If an Investor does not diversify his portfolio , the risk of the portfolio would include unsystematic risk only. As a result of Which total risk of Portfolio would be higher. In such case, the investor cannot expect higher return for higher risk . So, We can say return of a Security reflects systematic risk only . For this reason , the unsystematic Risk is considered irrelevant for analysis. Thus we can conclude the general relationship between risk and return is therefore a general relationship between Systematic Risk and expected Return.

 

The Risk reflecting here is Systematic Risk only as Unsystematic risk can be eliminated.

What do you understand by the term Foreign Exchange Risk Management in Finance?

In Case a firm is engaged in International operations , it has to invariably deal with foreign currency. International operations include :

  1. Import of Goods
  2. Export of Goods
  3. Investment, Borrowing , Lending in a Foreign currency etc.

Flow of fund from one country to another would include conversion of one currency into another currency. The rate at which conversion takes place is known as exchange rate . This rates are market driven i.e keeps on changing . Thus there is always foreign exchange risk involved to these firms who deal in international operations. Management of such exchange risk arising from exchange rate fluctuation is known as Foreign Exchange Risk Management.

What are the types of Foreign Exchange Risk?

Foreign Exchange Risk is divided into following three :

Transaction Exposure : It involves the possibility of Gain/Loss on existing foreign currency denominated transactions expected to arise from exchange rate fluctuation in the future . For Instance : Mr Thomas , resident of UK imported goods worth $10000. Payment to be made after the expiry of 3 months.  If the value of  dollar appreciates during these 3 month time , Cost to buyer would increase. Such kind of risk is known as Transaction exposure.

Translation Exposure :  It refers to Gains/Losses caused by the translation of Foreign Currency Assets and Liabilities into the Home Currency. These do not effect the cash flows of the entity.However due to aggregate of results, the profitability of an enterprise as a whole may come down, thereby affecting its value.

For Instance : A US Company operates in US , UK and Australia . In each of the countries , Return on capital employed is 45%. But when these results are consolidated in $, Return on Capital employed becomes 36% . This aggregated result would bring down the value of the firm.This is known as Translation exposure.

Economic Exposure :  Economic exposure is very similar to transaction exposure. The only difference is that transaction exposure is specific to a particular transaction and economic exposure relates to the entire investment as a whole.

For Instance : A software company in India has clients mainly in USA. The substantial increase or decrease in exchange rates will affect the operating Cash flow in INR and which in turn would affect the value of the firm.

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