1) Give an example of a capital budgeting decision and a financing decision. 2)
ID: 2636760 • Letter: 1
Question
1) Give an example of a capital budgeting decision and a financing decision.
2) What is the appropriate decision criterion for financial managers to use when selecting a capital project?
3) What are some of the things that managers do to manage a firm's working capital?
4)Which one of the following characteristics does not pertain to corporations?
a. Can enter into contracts.
b.Can borrow money.
c.Are the easiest type of business to form.
d. Can be sued.
e. Can own stock in other companies.
5) What are typically the main components of an excutive compensation package?
Explanation / Answer
1. In the capital budgeting decision , the corporation finds out the investment opportunities , return expected and risk involved and how best finance can be allocated to each such business opportunities.In a financing decision find out the amount and proportion of debt and equity that needs to be invested in the projects and how to get those finance.
2.In capital budgeting decisions , various criteria like NPV,IRR,MIRR,Pay Back Period,Discounted Pay Back Period etc are considered to arrive at the decison.
3.For better working capital management , managers keep a tab on the inventoty managent, efficiency in conversion of inventory into finished products , early sale of products to the customers and collection of payments from the customers. Less is the credit sales , the better. Getting longer credit from the suppliers is also beneficial in working capital management.
4.c.Are the easiest type of business to form.
5.The typical components of an executive compensation package are - basic salary , Dearness allowance, House Rent , Conveyance Expenses , Social Security Payments etc. In addition to theses they also get lot of perquisites , performance linked incentives and reimbursements.
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